Fresh analysis of FCA data reveals that a lack of clarity over pension tax policy triggered a £10 billion jump in withdrawals from retirement accounts around the time of Rachel Reeves’ first Budget.

Between 2018/19 and 2022/23, the five tax years before the general election campaign began, tax-free cash withdrawals from FCA-regulated firms averaged £7.9bn annually, never exceeding £8.7 billion even amid a post-pandemic rise in withdrawals.

That changed in the run-up to the 2024 election. Withdrawals climbed sharply to £18.3bn in 2024/25 — a roughly £10bn increase widely attributed to speculation that the Autumn Budget 2024 might reduce the tax-free cash allowance.

In response, AJ Bell has sent an open letter to Chancellor Healey urging him to publicly commit to a “Pension Tax Lock.” The firm argues such a commitment is overdue and would prevent a repeat of the disruption seen around the 2024 and 2025 Budgets, offering greater certainty to those saving for retirement.

Michael Summersgill, CEO of AJ Bell, said: “Pension providers raised alarm bells at both the 2024 and 2025 Budgets, warning that cash was being withdrawn from long-term pension investments and parked in the bank due to rumours around the future of tax-free cash.

“The FCA’s own data indicates that at the 2024 Budget alone savers pulled an additional £10 billion. That’s money being taken out of long-term investments, which is bad for the economy and bad for people’s long-term retirement plans.

“Although data is yet to be published for 2025, the experience of pension firms across the industry indicates the trend is only getting worse.

“The absence of a lasting commitment to stability around key pension tax incentives — a tax-free cash allowance in retirement and tax deferral when contributing — has allowed rumours to fester. A Pension Tax Lock would give certainty to savers and stabilise the retirement savings market without costing the Treasury a penny in new spending.

“The appointment of a new Chancellor presents an opportunity to finally draw a line under this issue, preventing a repeat when John Healey comes to deliver his first Budget.”