Key facts
- AJ Bell has written to Chancellor John Healey calling for a Pension Tax Lock.
- Savers withdrew an additional £10 billion from pensions around the 2024 Budget.
- Pension providers observed worsening withdrawal trends in 2025.
- A Pension Tax Lock would provide certainty to savers and stabilize the retirement savings market.
- Taking a £500,000 pension lump sum early could leave individuals £18,535 to over £63,000 worse off.
AJ Bell, a leading UK pension provider, has written to the new Chancellor John Healey urging him to publicly commit to a Pension Tax Lock. The company warns that ongoing speculation about changes to pension tax incentives, particularly tax-free cash allowances and tax relief on contributions, is causing savers to withdraw billions from long-term investments.
Analysis of Financial Conduct Authority (FCA) data indicates that around the 2024 Budget, savers withdrew an additional £10 billion from their pensions compared to previous years. This trend, driven by fears of potential cuts, is reportedly worsening in 2025, according to pension firms. In the five tax years prior to the 2024/25 period, average annual tax-free cash withdrawals across FCA-regulated firms were £7.9 billion, never exceeding £8.7 billion.
AJ Bell argues that a Pension Tax Lock would provide much-needed certainty for savers, stabilize the retirement savings market, and encourage long-term investment without costing the Treasury. The company highlights that individuals taking their full tax-free cash early and placing it in savings accounts could be significantly worse off over time compared to keeping the money invested.