State Pension experts tell Brits 'do not rush' ahead of Autumn Budget

Pension savers have been issued a warning ahead of the upcoming Autumn Budget next month. Chancellor Rachel Reeves is expected to target retirement pots with some pensioners becoming tempted to withdraw tax-free lump sums from their savings.

However, pension experts are urging people not to do "anything hasty" based on rumours about what could be implemented in the budget next month. Savers can currently take 25% of their pension pot tax-free, up to £268,275, once they reach the age of 55. However, it is feared Ms Reeves may soon cut the tax-free lump sum allowance to £100,000.

This has caused many pension savers to take out lump sums from their savings ahead of the budget. In August, pension pot withdrawals increased by 61% compared to in 2024.

Experts have now issued advice to savers, urging them to be careful before withdrawing cash. They also advise having a clear plan before taking out any money.

Alex King, Chartered Accountant and founder of Generation Money, said: "The age at the moment is 55 and from 2028 it goes up to 57. People need to be careful (withdrawing from their pension) from a tax point of view.

"If you take your 25% lump sum in one year, anything beyond that is going to be taxed at your marginal rate. So if you’re still working, the remaining 75% of your pension will be taxed at around 40/45% depending on how much you earn."

He added: "So it’s important to do a bit of forward-thinking on how much you withdraw. It probably does make sense to withdraw some but not the full 25% to make sure you get that bit of protection on your marginal tax rate in the future."

People normally decide to access their pension savings to help bridge the gap as they approach retirement. Others may decide to withdraw to clear debt or support family.

Alex continued: "People have also got to be careful about their money purchase annual allowance. If you start accessing your pension, your future contributions will be capped at £10,000 a year rather than £60,000.

"Basically, you’ve got to think really carefully about your tax situation. I would say, don’t do anything hasty and don’t rush to withdraw.

"But, it would be prudent to withdraw some if you’re 55 and above and you’re getting close to retirement. It would make sense to take some then but I wouldn’t recommend people take out the full 25% tax free as we don’t know what’s going to happen in the future.

"What happens with the Budget typically doesn’t get enacted instantly when it comes to pensions. There’s normally a bit of a gap to give people time to do some tax planning."

Tom Johnson, a retirement specialist at Strive Financial Planning, agreed with Alex, explaining that savers will have time to respond to any changes made in the budget. He urged people not to do "anything rash" as pension providers will not be able to enforce changes immediately.

Tom explained: "People should not take any money out of their pension based on rumours for the budget. For example, if they reduce the 25% tax free cash you can withdraw, pension providers will not be able to facilitate that straight away.

"They won’t be able to put it into practice straight away. It will take two or three years so people will have time to prepare. People should not do anything rash. There’s loads of people that are crystallising their pension right now and it’s absolutely barmy."

An HMRC spokesman previously said: "Speculating on any changes to taxes carries risks and customers should carefully consider their options before taking out tax-free lump sums."

It's been reported that Ms Reeves is eyeing up a £7 billion tax raid on pensions in a bid to fill the black hole in her Budget. Experts warned she could increase taxes on pension contributions paid by working people and on withdrawals by retirees.