Pensions UK Budget proposal urges long-term reform strategy to rebuild trust in pensions taxation, not short-term fiscal fixes
Pensions UK has submitted a Budget submission to the Chancellor outlining five principles for pensions taxation reform, warning that tactical changes to address short-term fiscal concerns threaten to erode trust in the retirement savings system. The organisation's submission recognises the Government's focus on increasing revenue but advocates for the Pensions Commission to create a long-term plan rather than making immediate reforms. Financial Conduct Authority (FCA) data cited in the submission shows UK pension savers withdrew a record £18.08bn in tax-free lump sums during the 2024/25 financial year, representing a 61% increase on the previous year, with withdrawals in the six months to March 2025 reaching £10.4bn. The organisation warns that speculation about changes to tax-free pension lump sum allowances has triggered dramatic surges in pension withdrawals, which could reduce pension fund capacity to invest in growth assets. Should the Government move forward with reform, it is essential that it draws on the insights set out in Pensions UK’s “Five Principles for Pensions Taxation” and consults widely to prevent unintended outcomes. These principles advocate a system that is adequate, fair, simple, sustainable, and supports positive saving behaviour—a foundation for a more stable and trusted pensions framework.