HMRC warning issued to people with savings ahead of 'tax raid' from October

Pension firms have issued a stark warning to the new Labour Party government over a potential tax raid on savings. The Chancellor, Rachel Reeves, is widely thought to be considering a cut to income tax relief on retirement savings for top-rate taxpayers in the October 30 Budget.

That could end up affecting nearly 9 million workers as more and more employees are dragged into paying tax at the 40 per cent rate over the next few years. Mike Ambery, retirement savings director at Standard Life, said: "A flat rate of pension tax relief will increase complexity into the pension system and have a lasting impact on people's future retirement, so it's important that decisions are made with a long-term view rather than focus on near-term fiscal challenges."

Steven Cameron, director of pensions at insurer Aegon, said: "While it may be tempting to the Chancellor to boost tax revenues by reducing such incentives, doing so could have far-reaching adverse consequences if they discourage people from doing the right thing and saving for their own retirement rather than relying on the state.'"

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Lynda Whitney, senior partner at Aon, said: "Pensions are a long-term product where trust in the structure is vital. Changes for short-term budgetary reasons could erode that trust – particularly if the Treasury makes what feels like retrospective changes to pensions taxation of retirement lump sums or inheritance of pension rules."

Steve Watson, director of policy & research at NatWest Cushon, said: "Any potential change in the pension equation needs to be part of a long-term view. We've seen how tinkering around the edges can lead to an imbalanced system.'

Tess Page, UK wealth strategy partner at Mercer, said: "We already know people are not saving enough for their retirement." Jamie Fiveash, boss of Smart UK, said: "The tax changes rumoured have the potential to move us in the wrong direction."