Chancellor John Healey is making the same mistake as Rachel Reeves. It could cost wreck retirements.
Chancellor John Healey needs to safeguard our 25% pension tax-free cash now (Image: Getty)
Right now, his Budget plans are descending into hell. Borrowing costs are rocketing at exactly the wrong time, while his fiscal headroom has shrunk from £24billion to below £10billion. He’s caught between the bond market, which wants him to cut spending, and the Labour Party, which just wants more taxes. Like Reeves, Healey also has to decide which taxes to hike. But he also needs to make it crystal clear which taxes he isn’t going to hike. Otherwise he’ll cause chaos, just like she did.
Experts are urging him to rule out a pension tax raid in his Budget on October 28. Reeves didn’t, and many savers paid a high price for the confusion that followed. Under Reeves, millions feared she would come for the hugely popular 25% tax-free cash, and raced to withdraw it while they still could. Tax-free cash, technically known as the pension commencement lump sum, is one of the biggest attractions of investing in a pension. People love it. And they’re terrified that a money-hungry Labour government will attack it. Just like Reeves stripped unused pension pots of their inheritance tax exemption.
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Today, savers can take up to £268,275 tax-free, meaning anyone with a pension worth up to £1,073,100 gets the full 25% benefit. But there have been repeated rumours that the cap could be cut, possibly to as little as £100,000. That would hit anyone with more than £400,000 in a defined contributions pension. That sounds like a lot of money, but it has to last for life. It would buy a 65-year-old an inflation-linked annuity income of just £24,000 a year. Hardly riches.
As speculation swirled before Reeves’s two Budgets, many savers decided not to hang around. They took their tax-free cash to the max. In the year of her first Budget, savers withdrew £18billion, some £10billion more than the year before.
Before her second Budget, the frenzy was even greater, driving tax-free cash withdrawals to £22billion, according to AJ Bell. In total, savers took around £24billion extra due to tax raid concerns. And here’s the thing. Reeves hiked all sorts of taxes, but she didn’t touch pensions tax-free cash.
The problem is, she only ruled out targeting it in the final days before her November 2025 Budget. By then, the damage had been done. Many savers had already taken the money prematurely, and regretted it.
The longer you leave money inside a pension, the better. It benefits from tax-free growth, and when you finally take your lump sum, that 25% is likely to be worth more because the overall pot is bigger.
We’re talking big potential losses that could wreck retirements. AJ Bell calculates that someone who withdrew £100,000 in tax-free cash and put it into an ordinary savings account would be more than £50,000 worse off after 10 years. The losses stack up for those taking bigger sums.
AJ Bell chief executive Michael Summersgill said the figures showed the real-world consequences of allowing pension tax speculation to run unchecked. “This trend is bad for households and bad for the economy. Pulling billions of pounds out of pensions prematurely reduces the capital available for long-term investment.”
He renewed his call for a “pension lock”, a pledge by politicians not to tamper with tax-free cash or equally valuable tax relief on pension contributions. Tens of millions rely on these incentives for a comfortable retirement, yet face uncertainty at every Budget. That has to stop.
John Healey could save everybody an awful lot of trouble by clamping down on tax-free cash speculation now. He has enough on his plate, and surely doesn’t want to be compared with Rachel Reeves too.
Man dies after fighting ‘breaks out’ on French coast as dozens try to board UK-bound boat
Medics tried to revive the man, but he was sadly declared dead at the scene.
Fighting broke out on the coast at Camiers, south of Boulogne-sur-Mer, it was claimed (file picture) (Image: Getty)
A man has died amid a reported scramble for places on a UK-bound dinghy. French prosecutors on Friday said they had opened criminal enquiries into two tragedies on their country’s coasts, believed to involve migrants trying to reach the UK.
On Thursday morning, fighting broke out on the coast at Camiers, south of Boulogne-sur-Mer, following “reports of a migrant-carrying vessel in distress”, according to a spokesman for the Pas-de-Calais prefecture. He also said: “Around thirty individuals managed to board the boat, but an adult male was then found in the water, and in cardiorespiratory arrest”. Medical experts tried to revive the man, who has not been identified, but he was later declared dead at the scene.
This came as around 781 migrants arrived in the UK on Wednesday, after crossing the English Channel, the highest number on a single day so far this year.
The cumulative number of arrivals by small boats in 2026 now stands at 18,565, according to provisional figures from the Home Office.
A separate fatal incident happened on the beach at Neufchâtel-Hardelot, the French spokesman added, saying the “body of a person in their thirties, of African appearance, was discovered” there.
The latest deaths mean that at least 21 people, including women and children, have died in the Channel this year as they tried to get to Britain. The worst tragedy of this kind came in November 2021, when 27 migrants died after a dinghy sank while heading to the UK – the highest recorded number of deaths from a single incident.
Migrants on a dinghy in Northern France (file picture) (Image: Getty)
The surge in crossings also indicates that people-trafficking gangs are still getting hold of dinghies and outboard motors with ease, despite a crackdown on supply routes.
In further chaotic scenes, a dinghy launched from near Bayeux, in Normandy, made a record 38-hour voyage.
They launched just before 10am on Monday and, on Tuesday afternoon, were picked up by RNLI lifeboats and later transferred to a Border Force cutter. The 51 migrants aboard were eventually brought ashore at Dover in the early hours of Wednesday.
The total number of arrivals, according to Home Office figures, is down 42% on the equivalent point last year, when the total stood at 32,188. It is also 26% below the figure at this stage in 2024, when the total was 25,165, figures showed.