One of the UK’s biggest DIY investment platforms has warned that ongoing budget speculation was causing real financial damage after savers rushed to cut around £600 million from their pensions amid fears Rachel Reeves would slash tax-free lump sum rules.
Michael Summersgill, chief executive of AJ Bell, said months of briefings and hints of a tax raid had prompted thousands of customers to make precautionary withdrawals in September and October as he believed the Treasury was preparing to cap the tax-free initial pension allowance of 25%.
Under current rules, savers aged 55 and over can withdraw up to £268,275 tax-free. Reeves ultimately decided not to touch the allowance, but Summersgill said the period of uncertainty had shaken confidence again.
“We saw the same pattern last year when similar fears led to £300m of early withdrawals,” he said. “Speculation alone can be harmful, and this year was no exception.”
While the Treasury refrained from changing pension lump sums, it did press ahead with controversial changes to the ISA system and Summersgill didn’t mince his words.
From April 2027, savers under 65 will only be allowed to pay £12,000 a year into cash Isas, although the total annual allowance of £20,000 will remain unchanged. The government plans to put the remaining £8,000 into Isas to boost investment in UK markets.
But in a move that shocked many in the industry, HMRC will also impose a new tax charge on interest earned on uninvested cash in Isas held by under-65s. Transfers from equity Isas to cash Isas will be banned to prevent workarounds.
Summersgill described the changes as “the exact opposite of simplification” and said the interest charge was “just crazy and so unhelpful”.
“How the government lost it this way, I don’t know,” he added. “There is nothing positive about the proposed interventions.”
AJ Bell reported a 22% rise in pre-tax profits to £137.8m for the year to September 30, with sales rising 18% to £317.8m. Platform assets reached a record £103.3 billion, supported by net inflows of £7.5 billion and market gains of £9.3 billion.
But shares fell 7.6% after the company said it would increase spending by more than £15 million next year to accelerate growth, fund new technology, do marketing and hire additional engineers.
Summersgill said the increased investment was vital: “There’s a huge growth opportunity. I’m not doing my job if we don’t invest aggressively to take advantage of it.”
The company expects pre-tax margins to decline to around 39-40% in 2026 from 43.4% this year, reflecting the increase in expenses.
