Pension savers warned of Budget 'double whammy' as tax breaks come under threat

Pension savers warned of Budget 'double whammy' as tax breaks come under threat Retirement savers have been warned that changes to two valuable pension benefits could leave them worse off Sign up to the Money Newsletter Email address Sign up I agree to receive updates and information about my account, the GB News Community, and related products and services from GB News. By signing up you agree to the Terms and Conditions and Privacy Policy and Community Rules. Thank you for signing up! See the latest from GB News here . Choose GB News on Google - add us as a preferred source Choose GB News Support GB News Champion free speech and independent journalism while unlocking exclusive benefits. Support us Pension savers could face a "double whammy" if John Healey targets two valuable retirement benefits in this week's Autumn Budget. Experts warn that changes to pension tax relief and tax-free cash could leave millions reconsidering plans built up over many years. Katie Horne, savings expert at Flagstone, said pensioners rely heavily on their retirement pots and could be hit hard if the rumoured changes go ahead. "Pensioners could face a double whammy in this Budget if a rumoured cap to pension tax relief and removal of the tax-free lump sum are announced," Ms Horne said. "The idea that pensions are something that people don't touch and simply leave to their children is outdated." Pension tax relief allows savers to receive a Government top-up on contributions based on their income tax rate. Most people can also withdraw 25 per cent of their pension without paying tax, subject to a maximum tax-free lump sum of £268,275. Flagstone's research shows how important pension savings are to people approaching retirement. Pension tax relief allows savers to receive a Government top-up on contributions based on their income tax rate | Getty Two in five over-40s, or 40 per cent, consider pensions a vital part of their later-life finances. That rises to 48 per cent among people with at least £100,000 in investable assets. Workplace pension provider Penfold is now calling on the Government to confirm that pension tax relief and tax-free cash will remain unchanged. Chris Eastwood, the company's chief executive and co-founder, warned that repeated speculation was already making it harder for people to plan their retirement. "Pensions only work if people trust the rules they are saving under. Repeated speculation about tax relief or tax-free cash makes long-term planning harder, even if the eventual Budget leaves the rules unchanged." Tom Selby, director of public policy at AJ Bell, welcomed reports that John Healey will leave pension tax-free cash untouched in the Budget. He said: "Reports over the weekend that Healey doesn't plan to touch tax-free cash entitlements in this Budget are welcome, but he has an opportunity to go further by locking in long-term stability for pension savers." He called for a "Pension Tax Lock" guaranteeing that pension tax relief and tax-free cash entitlements would not be changed over the long term. Mr Selby argued that this would give savers greater confidence, end "Budget-driven instability" and support UK investment without costing the Treasury anything. The Institute for Fiscal Studies has examined how much money the Treasury could raise by restricting pension tax relief. Its modelling suggests that limiting relief to the basic rate could generate significant revenue. However, the think tank has also warned the Government against pursuing such a reform. With pressure mounting on Mr Healey to strengthen the public finances, Penfold has identified three pension areas it will be watching closely when the Chancellor delivers his Budget. The first is pension tax relief. Mr Eastwood expects a relatively quiet Budget on this front but has not ruled out a surprise. He believes major pension changes are unlikely this time around, pointing to the backlash that followed the salary sacrifice cap announced in 2025. "The risk I'd watch is a smaller move," he said. "Examples are a trim to the tax-free lump sum or frozen allowances. Even rumours of that kind can change what people do with their pensions." Mr Eastwood stressed that retirement saving depends on stability. People set money aside for decades on the understanding that the tax framework will broadly hold when they come to draw on it. The salary sacrifice change is already on the statute book | GETTY The salary sacrifice change is already on the statute book. From 6 April 2029, the first £2,000 a year of employee pension contributions made through salary sacrifice will keep its National Insurance exemption, with amounts above that threshold subject to both employee and employer National Insurance. The second area on Penfold's watch list is employer National Insurance. Currently set at 15 per cent on earnings above £5,000, Mr Eastwood does not anticipate a reduction given the tight fiscal environment. He also expects no fresh increase to the rate. However, he warned that higher employment costs can squeeze the budgets firms set aside for benefits, including pension contributions. He urged the Government to avoid any measures that would push employers towards paying only the legal minimum. The third area is auto-enrolment thresholds and minimum contributions. The current legal minimum stands at eigh per cent of qualifying earnings, split between three per cent from the employer and five per cent from the employee including tax relief. Mr Eastwood said there is mounting evidence that these levels may leave many workers short of the retirement income they expect, and backed a gradual increase from eight per cent towards 12 per cent. Pension providers are calling for long-term certainty as speculation over retirement tax benefits continues | GETTY Mr Eastwood called on the Government to give pension savers certainty by confirming that both tax relief and tax-free cash will be protected for the duration of this Parliament. He also wants a clear timetable with firm dates for raising minimum contributions. The Pensions Commission's final recommendations are due in spring 2027, and Mr Eastwood said the Government should set out how it intends to act on those findings. He also urged ministers to commit to linking the £2,000 salary sacrifice cap to inflation. "There also needs to be a focus on making pensions easier to understand," he said. "People should be able to see what they have, what they're building towards and where to go for help if they need it." He added that any reforms should safeguard younger, lower-paid and part-time workers who depend heavily on automatic enrolment to build their retirement savings. Our Standards: The GB News Editorial Charter Money John Healey backs Rosebank oil drilling despite Cabinet split Money Savers offered Cash ISA 'workaround' after Labour slashes tax-free allowance to £12,000 Money John Healey set to shield nearly one million pensioners from income tax in Budget Money Youth unemployment worse in some parts of England than Bulgaria or Slovenia as 'benefits bill rises' Money Labour's triple lock shake-up could cost pensioners £688 a year Money Council tax arrears rise by £1,500 every minute as debt crisis deepens Exclusive Money Autumn Budget 2026: What John Healey could announce for pensions, savings and household finances Money Is inflation eating into your savings? Why more Britons are looking to gold Money Nationwide increases interest rates across popular savings accounts Money State pension could reach £33,000 a year by 2050 under triple lock shake-up Money Oil prices hit five-month high as Middle East conflict fears intensify Money Aldi and Lidl hit with tougher rules in major supermarket crackdown Money John Healey plots tax raid on retiring business owners in Budget Money DWP can take money from bank accounts under new powers - what you need to know Money Six million households to get £150 energy bill discount as letters land on doormats this week Money 'Homeowners can't afford to sit back and wait': Millions issued mortgage warning as rates tipped to rise Money Sainsbury's boss issues warning to John Healey ahead of Budget as households brace for rising costs Money John Healey vows to back Britain's 'bloody-minded entrepreneurs' at Budget despite £3tn debt burden Money MPs push for Universal Credit boost for those aged 66 as state pension age rises Money Barclays to axe 5,000 jobs as bank turns to AI to cut costs Money Ten million Britons to miss out on full £489 state pension boost next April – Are you one of them? Money Andy Burnham considers scrapping £108 energy bill charge paid by millions of Britons Money Millions of Britons could face 'unpleasant' fines as HMRC gains access to financial details Money UK national debt breaks £3trillion barrier for first time as borrowing crisis deepens Money Elon Musk backs SpaceX and Tesla merger Money State pension rise confirmed for millions of Britons: How much more will you get next year Money Inflation rises to highest level this year in fresh blow to John Healey ahead of Budget Money Ryanair chief warns Europe faces 'biggest increase in airfares in history' Money DWP issues urgent warning as 660,000 pensioners could be missing out on £4,500 boost Money Paddy Power owner to cut 1,400 jobs as it 'cannot fully absorb' Labour's gambling tax hike