Advisers are seeing a surge in queries around pensions taxation and wealth protection ahead of Chancellor Rachel Reeves’ first Budget on 30th October.
Research from AJ Bell found that almost all advisers (99%) reported clients approaching them with questions about potential changes.
Uncertainty about what might be announced has led to speculation about a possible flat rate of pension tax relief and changes to tax-free cash options.
Advisers noted that taking pension tax-free cash increased among clients, with 33% reporting this rise, while 16% said clients were contributing more to their pensions in response to Budget speculations.
Capital gains tax (CGT) has also attracted attention, with 27% of advisers witnessing a rise in related queries.
Furthermore, 19% of advisers reported an increase in clients looking to sell assets and realise gains before the Budget announcement.
Other wealth protection strategies have gained traction, including gifting (10%), moving assets to an ISA (8%) or SIPP (5%), boosting ISA subscriptions (4%), and moving unwrapped assets into investment bonds (4%).
AJ Bell is urging the government to commit to a ‘Pensions Tax Lock’ to minimise damaging speculation, which would provide greater certainty for savers.
Rachel Vahey, head of public policy at AJ Bell, said: “The wait for Labour’s first Budget following July’s election has felt almost as long as the proceeding 14 years since the late Alistair Darling held the post of chancellor when the party was last in government.
“Speculation and rumour have clouded any sense of optimism that Reeves and Starmer have tried to inject into the state of the country’s finances in recent weeks, and this has had a direct impact on the decisions savers and investors are making ahead of 30 October.
“Almost 100% of advisers have said they’ve seen queries and requests generated off the back of Budget speculation, according to a survey conducted by AJ Bell.
“But it’s hardly surprising given the high number of stories circulating on various possible reforms, filling the policy vacuum leading up to the Budget.
“The fact that a third of clients have requested to take tax-free cash, a decision which in some cases could find people in a worse financial position longer-term, should be concerning to a government who are also committed to harnessing the investment power of UK pension funds to fuel its plans for economic growth.
Vahey added: “Aside from highlighting the importance of financial advice for making measured long-term financial decisions, this lack of clarity does not help savers or the government.
“Although recent reports suggest that Reeves has backed away from introducing a flat rate of pensions tax relief, a week and a half still feels a long time to keep people who’ve saved all their lives for a decent standard of living in retirement on the hook.
“What’s clear is that the level of uncertainty created ahead of the Budget has real-world consequences.
“Given one of the key promises made by the new government was to deliver economic stability to Brits, Reeves should use her Budget to nip this issue in the bud by pledging not to make major changes to either pension tax relief or tax-free cash.
“This ‘Pensions Tax Lock’ would send a clear signal to savers that the goalposts won’t be moved at a later date and should give people more confidence to take decisions based on their long-term interests, rather than a knee-jerk reaction to wild speculation.”
