Rumours the chancellor could slash tax-free pension cash have been branded "completely unfair" by advisers and the wider industry.
A story in The Telegraph today claimed Rachel Reeves could look to cut the maximum tax-free cash entitlement from £268,275 to £100,000.
Seán Standerwick, director at MLP Wealth, said such a change would be "completely unfair" on hardworking people.
He said: "There are people who have saved up all their lives in order to take out these lump sums to pay off mortgages, or afford to retire comfortably. To suddenly decrease this by around 62 per cent is completely unfair.
"They could offer protection for those people. But for those that don’t yet have those amounts we should be encouraging them to save more into pensions, to be less reliant on the state, especially given the ageing population."
If the changes were made, anyone retiring with a pension pot of £400,000 would likely pay more tax in later life.
Standerwick said there would be more effective ways of the government raising funds and said he thinks in reality it would be a difficult policy to implement. Though, clients are still concerned about potential changes.
He added: "I have had a lot of clients ask me what to do, they are worried, governments should help reassure people.
"I tell my clients not to make knee-jerk reactions, we cannot predict politics, we review their plans and ensure they are on track including any legislative changes. This is what ultimately gets them to their goal and provides them with financial peace of mind."
Creating uncertainty
Numerous rumours about tax changes is creating an uncertain atmosphere, said Tom McPhail, director of public affairs at the Lang Cat.
He said: "Through this protracted period of delay between the election and the Budget, combined with their endless doom-mongering and warnings of tax rises, the government has created an atmosphere of uncertainty and disquiet among investors and the industry alike.
"The tax-free cash rumour is particularly problematic as it is now prompting people to rush into decisions which they may later regret."
According to the IFS, a cut in the tax-free cash sum could affect one in five savers and almost half of all public sector workers.
McPhail added: "An abrupt cut affecting those close to retirement would be hugely damaging and might even be open to legal challenge. It would also undermine confidence in the system. Hopefully, if the government does decide to go ahead with a cut to the TFC sum, they will at least introduce it in a measured and fair way, over a long period."
And Myron Jobson, senior personal finance analyst at Interactive Investor, said while a change would increase cash for the government it would "devastate" the retirement plans of many.
He said: "The pension tax-free lump sum is one of the best-loved and most well-understood parts of the pension system. Significant changes to it could risk undermining confidence in pensions, which is the last thing we need as many people aren’t saving enough for a comfortable retirement.
