Mike Morrison, head of pensions, AXA Wealth, said: “Whilst there is an obvious need to find new ways to raise funds in the UK, a tax on lump sums withdrawn from pension pots would be the final nail in the coffin for pensions. Such a move could cost new retirees thousands of pounds, especially when a tax fee lump sum is one of the key incentives of saving into a pension in the first place.
“Pensions are in crisis already and there must be measurements in place to encourage the nation to save and avoid poverty in retirement, and maintaining pension incentives is key to this. This proposal, alongside the current reforms to higher rate tax relief, would be disastrous for saving and the middle classes, who stand to bear the brunt.
“Introducing flexible drawdown was designed to offer more choice and flexibility to those with larger pension pots, yet these proposals fundamentally oppose this aim. In a time of economic crisis, it is tempting to rush new proposals through. Political parties would be wise to not push through another tax initiative, which may not only be short lived, but also have some serious unintended consequences.”
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