The next UK Budget date is set – here’s what it means for your retirement pot
Key Points
- Chancellor John Healey will deliver the Budget on 28 October, the first under Prime Minister Andy Burnham
- Tax-free cash withdrawals hit £18.3 billion in 2024/25, against a pre-election average of £7.9 billion a year
- FCA data shows withdrawals rose 40% in 2023/24 and a further 63% in 2024/25 amid Budget speculation
- AJ Bell is calling for a Pension Tax Lock to stop savers withdrawing on rumour
- Unspent pensions come into inheritance tax from April 2027 under rules already legislated
Chancellor John Healey will deliver the first Budget of Andy Burnham’s government on 28 October, opening a three-month window in which pension savers face renewed speculation about tax-free cash.
Healey confirmed the date on in a video message released by the Treasury, noting ‘it will be built on fiscal discipline’. He added that the Budget would meet the government’s fiscal rules and move money and power out of Westminster.
The announcement matters for retirement savings because the two previous Budgets both triggered a surge in withdrawals from pension pots.
Rumours that the Treasury would cut or cap the Pension Commencement Lump Sum – the 25% of a pot savers can normally take free of income tax – circulated for months ahead of each fiscal event. Neither Budget changed the rules, but savers acted on the speculation before it resolved.
What happened before the last two Budgets
Financial Conduct Authority data shows tax-free cash withdrawals across regulated firms rose 40% in 2023/24, ahead of the general election, and by a further 63% in 2024/25, the year of the first Budget under the Labour government.
In the five tax years from 2018/19 to 2022/23, those withdrawals averaged £7.9 billion a year and never exceeded £8.7 billion. In 2024/25 they reached £18.3 billion. Investment platform AJ Bell puts the excess at around £10 billion, a figure the firm calculates by comparing the 2024/25 total against the earlier run rate rather than one the regulator publishes.
Money taken out of a pension on the strength of a rumour cannot always go back in. Savers who have already accessed a defined contribution pot trigger the money purchase annual allowance, which caps further tax-relieved contributions at £10,000 a year. Cash moved into a current account also sits outside the tax wrapper and forms part of the estate for inheritance tax purposes.
AJ Bell has written to the chancellor’s office calling for a Pension Tax Lock, a public commitment not to alter pension tax rules for the length of the parliament. “Recently appointed chancellor John Healey has wasted no time,” said Tom Selby, Director of Public Policy at AJ Bell.
The firm argues that confirming early that tax-free cash is safe would remove the incentive for savers to withdraw pre-emptively, and that it would cost the Treasury nothing to say so.
Pensions and inheritance tax
A separate change already sits on the statute book. From April 2027, unspent pension pots count as part of the estate for inheritance tax, reversing a position under which savers who died before 75 could pass a pension on tax-free.
AJ Bell and other providers have proposed alternatives that raise comparable revenue, including a flat charge on inherited pots or taxing them through the income tax system, on the grounds that both would avoid lengthening probate for bereaved families.
Burnham has said his government will stick to Labour’s fiscal rules and to the party’s 2024 manifesto pledges not to raise income tax, VAT or national insurance contributions, which narrows the range of options available to Healey on 28 October.
