The Government wants to reform the triple lock in April 2030.
Andy Burnham has been warned against letting his Chancellor make further pension changes (Image: Getty)
UK retirees face the possibility of a huge hammering as Andy Burnham is warned of “unintended consequences” if he lets his Chancellor make further pension changes. An expert has said John Healey must not tweak the system further after the Prime Minister revealed that he would alter the State Pension triple lock in 2030. There is also speculation that the amount that people can withdraw from their pension on a tax-free basis could drop from £268,275 to £100,000 — a £168,275 hit.
Andrew Prosser, head of investments at InvestEngine, said: “With the Government having already announced changes to the State Pension triple lock from 2030, arguably one of the most damaging things the Chancellor could do is introduce further changes to the pension system that unsettle savers and undermine confidence in retirement planning.
“One proposal that has been mooted is reducing the amount of tax-free cash people can take from their pensions at retirement. Currently, most savers can withdraw 25% of their pension tax-free, up to a maximum of £268,275 across their pensions.
“There has been speculation that this ceiling could be reduced to £100,000. While relatively few people have pension pots large enough to take advantage of the full allowance, reducing it could be seen as another blow to retirement savers at a time when the Government needs to encourage people to put more money aside for later life.
“It could also have unintended consequences for people in final salary schemes, who may have planned their retirement around an entitlement to tax-free cash.”
Under the Government’s proposed, changed model, pensions would rise by the highest of either inflation, 2.5% “or what is required to maintain its record high level against average earning”.
By making the changes, ministers expect to save £15billion a year by the end of the next decade, rising to around £50billion a year by 2050. These savings would help support a new National Care Service, which Mr Burnham has said would be “a person-centred, high-quality care service that starts in the home”, with “no care charges paid out of your basic State Pension”.
The Work and Pensions Secretary, Pat McFadden, told MPs on Tuesday: “The cost of inaction, the cost of turning away from this, is more pressure on the NHS, more ambulance call-outs, more A&E admissions, more corridor care and more people stuck in hospital when they don’t have to be – and that is why change is needed.
The Chancellor will present his Budget on October 28 (Image: Getty)
“Now, the triple lock has, of course, been subject to much debate. Economists and commentators have proposed a range of options – as has the party opposite over the years – from removing the earnings link to scrapping the triple lock altogether.
“Some have called for the State Pension to be means tested but we have rejected these proposals. We believe our plan is the right answer to a difficult question that has been ignored for far too long.”
Mr Healey said on Thursday: “The UK economy is resilient and my Budget will protect Britain’s resilience through this turbulent time. Conflict in the Middle East and Ukraine is hitting people and around the world, pushing up energy prices and the cost of government debt. Britain and our allies can face these challenges together.
“I will work with international partners to keep trade moving, strengthen resilience and deliver good growth for all. Fiscal discipline is the foundation for supporting families and businesses today, and building hope for the future.”