‘Panic over Rachel Reeves’s Budget made me take my lump sum – I wish I hadn’t’

Savers feel ‘messed around’ into making significant financial decisions they now regret

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Have you been refused from returning a tax-free pension cash lump sum within 30 days of taking it by your pension provider? Let us know by emailing [email protected].
In the weeks before the Budget, many savers were worried that Chancellor Rachel Reeves would slash the 25pc tax-free lump sum that can be withdrawn from a pension.
The Government’s actions stoked these fears. Officials reportedly asked a top pension provider to look into the impact of cutting the amount from £268,275 to £100,000, and the move was never ruled out by the Treasury.
In the end, in her maiden Budget, Rachel Reeves left the lump sum untouched. But the damage was done, and speculation had already led to pensioners making withdrawals.
Bestinvest, the investment firm, reported that pension withdrawal requests jumped more than two-fold in October compared to the same month in 2023.
In his post-Budget analysis, Paul Johnson, of the Institute for Fiscal Studies (IFS), said the Chancellor should “reflect on the damage done by having allowed various rumours to circulate for so long”.
Now, savers who feel they were “panicked and messed around” into making significant financial decisions have said they regret their actions.
Neal Morris, from Stourport-on-Severn, Worcestershire, took out the full tax-free lump sum of £268,275 in October and used the money to buy government bonds. The 55-year-old said the Chancellor’s actions were “irresponsible and shocking”.
He added: “They could have made it clear from day one what they intended to do and not do. With hindsight, I wouldn’t have taken my full tax-free lump sum, but I do not have the privilege of hindsight and have to take calculated risks instead.”
He rejected the Government’s claim that public finances were in a worse-than-expected state. “They’d been in opposition for years, with full access to data. Pretending they didn’t know how bad things were is simply not an excuse.”
Like Mr Morris, Martin Whapshott said he “withdrew an awful lot of money because I couldn’t trust Labour”.
The Royal Navy veteran said he is “almost in tears” over the withdrawal of £213,000. “I have been messed around and panicked into making a decision.
“I cannot believe Rachel Reeves’s incompetence in allowing people to make decisions when she knew full well that she wasn’t going to make that change,” he said.
After his career in the Armed Forces, Mr Whapshott worked for the Bank of England and has been saving since he was 19 years old. He has since put part of the sum he took out of his pension into an Isa, and the rest into a general investment account, which will incur capital gains tax.
“I saved my whole life. I went mental,” he explained.
Mr Whapshott’s family also faces an inheritance tax hit, after Ms Reeves announced that private pensions will be subject to inheritance tax and thresholds will be frozen until 2030.
He is considering leaving the UK and moving to a “tax haven” due to concerns about inheritance and capital gains tax. “Reeves has priced me out”, he said.
Claire Trott, of wealth manager St James’s Place, said: “Speculation surrounding potential tax-free cash restrictions was unhelpful to those evaluating their portfolios. This put individuals in a difficult situation, with many feeling they were being forced to make significant financial decisions.”
Bob Maker, 61, also withdrew his remaining tax-free amount of £6,500 ahead of the Budget – he has since reinvested it into another pension. The limit for withdrawing a lump sum from one pot and putting in another, known as recycling, is £7,500.
Mr Maker previously made a lump sum withdrawal from his pension, taking a proportion of the 25pc. But if a saver had more than £7,500 available to take, like Mr Morris and Mr Whapshott did, they would not be able to reinvest it in a pension, meaning they risk having to store it in a less tax-efficient account.
The retired detective chief inspector, from Hampshire, said he is shocked that the Government can “get away” with allowing the speculation to grow as it did.
“They should be honest. If you’re not going to touch something, then say that. They could have said that back in August.”
He suggested that the Government was trying to “soften the blow ahead of time” by not shutting down rumours, but this was irresponsible. For some people, it will have “wrecked their retirement plans”, he added.
Lily Megson, of My Pension Expert, said: “The IFS’s assessment rings true; allowing rumours to swirl without timely clarification was indeed irresponsible.
“The Government should have acted sooner to build confidence among savers, particularly following years of fiscal instability. Instead, it allowed this uncertainty to grow – possibly as a tactic to emphasise the so-called ‘black hole’ in public finances – and fuelled an already rampant culture of fear and unease.
“Britons’ finances are not to be used as a political ploy.”
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