Burnham and Healey face investor fury over summer of tax speculation
Andy Burnham and John Healey are contending with a growing backlash from investors after another summer of tax speculation looks set to leave financial managers on edge.
The chief executive of one of the UK’s biggest investment platforms, AJ Bell, urged Chancellor Healey to take a more emphatic approach on ruling out tax hikes across certain areas of the UK economy.
In a letter seen by City PM, the platform’s chief executive Michael Summersgill urged Healey to publicly say pension taxes will be left untouched in order to stop retirees from making rash decisions to withdraw cash from savings pots.
Summersgill said speculation around pensioners over 2024 and 2025 – when tax-free cash withdrawals surged by up to 63 per cent – showed that uncertainty put pension plans at risk and reduced investment in British firms.
He added that it was “no exaggeration” to suggest that some £10bn had been withdrawn earlier than planned due to speculation.
“What we are calling for does not require new legislation or a penny of government spending,” Summersgill said.
“All that is needed is a clear commitment from the Chancellor that key retirement savings incentives, particularly tax-free cash, will not be altered, at least for the rest of this Parliament.”
He added that some savers could be around £63,000 by opting to take out lump sums early rather than leaving cash invested.
Tax speculation irks City
In past years, reports have suggested that the Treasury considered reducing the tax-free lump sum allowance or detaching the tax relief on pension contributions from the highest marginal rate. Former Chancellor Rachel Reeves opted instead to add in a £2,000 annual cap for pension contributions without paying national insurance.
Burnham could re-consider tax reliefs related to UK and international investments for pension funds as one of his economic advisers, Andy Haldane, the former Bank of England chief economist, called for the government to change taxation to create a domestic bias.
Recent tax speculation has also extended to areas such as housing and inheritance, which could cover a new social care system hailed by Burnham.
Retailers are also wary of a possible tax hike on their warehouses, which would be targeted as part of a bid to back pubs.
Other City investors have also separately told the government to rule out exit taxes, which would mean that capital gains taxes are applied when business owners take assets away from the UK.
Founders including Barney Hussey-Yeo, who started the fintech Cleo, said some entrepreneurs were already “planning their exit routes” as a result of damaging speculation.
“It’s going to be devastating for the UK economy,” he said.