The firm shared its Budget submission to the Treasury today, highlighting that a pre-Budget commitment to pension tax stability throughout this parliament would allow Mr Healey to ensure there is no repeat around his October Budget or future fiscal events.

The calls come after the last two UK Budgets prompted thousands to make massive cash withdrawals to avoid being impacted by speculated taxes on pensions. Analysis of FCA data by AJ Bell revealed that excess tax-free cash withdrawals of around £10 billion were triggered by speculation around the 2024 Budget, illustrating the scale of the impact on retirement plans and the wider economy. 

AJ Bell chief executive, Michael Summersgill

AJ Bell’s submission to the Treasury continues its long-running campaign for a Pension Tax Lock, calling on government to make a long-term commitment to stability on key pension tax incentives: tax-free cash (Pensions Commencement Lump Sums, or PCLS) and tax relief. 

AJ Bell chief executive, Michael Summersgill, said: “Savers lit a £10bn distress flare at the 2024 Budget, which was never extinguished. To avoid another damaging repeat, Chancellor John Healey must side with savers by committing to pension tax stability now. 

“A pledge of certainty would not cost a penny in new Treasury spending and put an end to rumours that have damaged household finances and the economy.

“The Chancellor should be laser-focussed on boosting growth and getting households onto a sound financial footing. Ending a phenomenon that has seen tens of billions taken out of investments and parked in cash should be right in his crosshairs.”

The group warned that constant speculation about potential changes to retirement saving incentives, particularly tax-free cash, “undermines confidence in the pensions system and leads to people making irreversible decisions based on fear, rather than their long-term financial goals. This is an unacceptable position given pensions form the cornerstone of long-term financial planning and personal financial responsibility.”

AJ Bell suggested six changes the Chancellor could make at this year’s Budget to protect savers and investors.

1. Changes to tax relief on pensions contributions

Speculation about changes to tax-free cash has been damaging, but uncertainty over pensions tax relief is also a recurring concern at each Budget. Tax relief reflects the fact that pensions are deferred income and is central to encouraging long-term saving and reducing future reliance on the state. AJ Bell said the Chancellor should commit to protecting both tax relief and tax-free cash, the two key pension tax incentives. 

2. Changes to Inheritance Tax

AJ Bell has opposed plans to bring unused pension funds within IHT from April next year, claiming the emerging rules are unnecessarily complex, and will create confusion, cost and distress for bereaved families. Simpler alternatives, such as a flat-rate charge on pension funds at death, should be considered instead.

3. Rethink introduction of a new First Time Buyer ISA and the future of the Lifetime ISA

The firm said the government should retain and reform the Lifetime ISA “so it works better for savers and first-time buyers. If it proceeds with introducing the FTB ISA, then an appropriate transition for Lifetime ISA customers should be developed.”

4. Encourage UK equity investment

AJ Bell suggested the Chancellor could remove stamp duty on UK shares to support UK equity investors. “At a minimum, stamp duty should be removed from UK shares held in ISAs. The cost to the Treasury would be relatively modest, but the measure would send a clear message that government wants to make it easy for people to invest, particularly in UK assets.”

5. Rethink changes to non-Cash ISAs

It also called for a rethink of proposed changes to non-Cash ISAs, claiming they will add complexity and risk pushing more ISA account holders into cash rather than investment. That would run directly counter to the government’s wider policy objectives. A different approach is still needed and is not too late to adopt.

6. Don’t penalise investors to raise short-term revenue

AJ Bell called on the government to stop penalising investors, stating that capital gains tax and investment income allowances have already been severely reduced in recent Budgets. Further changes would weaken incentives to save and invest and should not be pursued.

A HMT Spokesperson said:  “The Chancellor is fully focused on his priorities, which will boost business, help with the cost of living and support people in every postcode. 

“As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”