Advisers seek pension tax certainty ahead of Budget

The majority of financial advisers want greater certainty over pension taxation and are calling for a simpler tax system ahead of next week’s Autumn Budget, according to Royal London.

Its study found that 59 per cent of advisers identified pension tax certainty as their top priority, followed by tax simplification at 53 per cent.

Other priorities included greater incentives for UK investment (38 per cent), more detail on social care reform (35 per cent) and inheritance tax reform (34 per cent).

Uncertainty over the planned changes to the inheritance tax treatment of pensions is already influencing client behaviour, it found.

Almost two-thirds (64 per cent) of advisers said the changes were the issue most frequently raised by clients, while 84 per cent said they had affected discussions to some or a great extent.

Half of advisers had seen an increase in clients gifting lump sums or making earlier pension withdrawals, while 49 per cent reported more gifting under the normal expenditure from income exemption.

Almost half (48 per cent) had also seen increased reviews of estate plans.

The changes could have wider implications for long-term saving. Some 39 per cent of advisers expected clients to make greater use of other savings and investments, while 25 per cent thought some might reduce pension contributions.

However, 46 per cent said it was too early to assess the impact.

The apparent decision to rule out an increase in capital gains tax in the Budget will also ease one area of concern.

Half of advisers said a rise from April 2027 could prompt clients to bring forward investment disposals, while 48 per cent expected clients to restructure investments to improve tax efficiency.

Despite the potential for greater certainty on capital gains tax, advisers remained pessimistic about the Budget’s overall impact.

Almost two-thirds (62 per cent) expected it to have a negative effect on clients’ long-term financial security, including 20 per cent who anticipated a significant negative impact.

Just 9 per cent expected a positive outcome.

Royal London head of policy, Jamie Jenkins, said: “The bigger message coming through from advisers is that people need certainty and simplicity if they are going to plan confidently for the long term.

"Changes to the inheritance tax treatment of pensions are already influencing conversations and, in some cases, changing behaviour.

“Advisers are telling us clearly that they want greater stability around pension taxation and a simpler tax system. Providing that certainty would give people firmer foundations on which to make important decisions about saving, investing and retirement.”

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