State pensioners issued urgent warning over tax 'changes' - 'in the firing line'

Experts have warned pensioners against making one impulsive decision ahead of potential tax changes, which could see them "missing out". Rumours have been swirling that Rachel Reeves' plans to slash the amount of tax-free money retirees can withdraw from their pension in her Budget next month.

Currently, once Brits turn 55, they are entitled to take 25% of their pension pot tax-free, capped at a maximum of £268,275. However, the Chancellor will be attempting to fill a black hole estimated at around £50 billion by some economists in her Budget on November 26. As Labour promised in its 2024 manifesto not to raise income taxes, VAT, sales tax, and corporation tax, speculation has shifted towards tax hikes on pensioners.

This has led to heightened anxiety, causing a surge in pensioners withdrawing their savings, transferring gifts to relatives and buying second homes, according to Andrew Tricker from Lubbock Fine Wealth Management.

According to figures from the Financial Conduct Authority (FCA), savers took out £70 billion from their pensions in 2024-25 compared to £52 billion the previous year.

However, retirement experts have warned pensioners to consider the decision carefully because it is irreversible and could result in a loss in the long term.

Speaking to the Telegraph, Steven Camero of life insurer Aegon warned it could be "dangerous". He explained: "It's usually a bad idea to take money out of your pension before you need it, because you immediately lose the tax-favoured status of your pension."

Mike Ambery, pension and savings director at Standard Life, added: "It's crucial to remember that acting on speculation can lead to unintended consequences - such as missing out on future investment growth."

It comes as Rachel Reeves shifted her reasoning for the flailing UK economy towards Brexit, attributing this as a reason for long-term damage, when speaking to the world's leading finance ministers and central bankers.

"The UK's productivity challenge has been compounded by the way in which the UK left the European Union," said remarks published this weekend, at a committee at the International Monetary Fund (IMF).