With ongoing speculation that pensions could be targeted in the upcoming Autumn Budget as Chancellor Rachel Reeves seeks to plug a £40bn hole in public finances, Grunberg is warning that changes to pension tax relief could discourage millions from saving for retirement.

Nimesh Patel, Tax Partner at Grunberg, commented: “There have been persistent rumours about changes to pension income tax rules, including possible restrictions on the amount of tax-free lump sum available.

“This was speculated on before last year’s Autumn Budget, so it’s certainly possible we could see it on the table again this year.”

While high earners have already seen their pension tax relief reduced in recent years, Nimesh believes the biggest hit could be to middle earners.

“If tax relief is cut further, the immediate impact on high earners will be limited, as they’ve already experienced reduced relief.

“However, middle-income earners will be impacted and may be discouraged from using pensions as a savings vehicle.”

The firm warns that removing incentives to save could undermine the country’s long-term savings culture.

“There is a real risk here if the Government choose to cut relief now. Fewer incentives mean fewer people will feel motivated to save for retirement, and that’s a problem for individuals and for the wider economy.”

So far, the firm has not seen clients moving significant wealth into alternative tax shelters, but the options could be narrowing.

“We haven’t yet seen people shifting wealth out of pensions in anticipation of changes, as at the moment it is purely speculation.

“The difficulty may be that other tax shelters may also be targeted by the Government, meaning that there are fewer tax-efficient options available for savers.”

In the meantime, Nimesh urges those concerned to act now rather than wait for policy announcements.

“The smart move is to take advantage of the rules we have now while we know exactly how they operate.

“That could mean reviewing whether you can draw a tax-free lump sum from your pension under current limits, or making contributions now to ‘bank’ today’s tax relief before any new rules come in.”

Grunberg continues to support individuals and businesses with tax and pension planning, helping clients make informed decisions.

To speak to a partner at Grunberg, visit www.grunberg.co.uk or call 020 8458 0083.