Rachel Reeves’ Autumn Budget triggered a rush to pull cash out of pension funds which has led to six-week delays for savers withdrawing money.
The chancellor’s October inheritance tax raid has sparked a surge in people seeking to take their cash out of retirement pots in a bid to avoid paying the levy, after Ms Reeves scrapped an exemption on them.
One person was left waiting two months for their payment, it has emerged.
Currently, the levy is charged at 40 per cent on assets over £325,000, with those passing on their main homes eligible for an extra £175,000 allowance meaning couples can pass on up to £1 million tax free.
But the changes, set to come into effect in April 2027, mean savers will see their pension pots counting towards the tally, dragging thousands more into paying inheritance tax.
It has led to a surge in retirees looking to withdraw cash from their pensions and spend it now in a bid to minimise their tax liabilities, leading to delays in the system, The Telegraph reported.
Daniel Hough, of wealth manager RBC Brewin Dolphin, said: “There are widespread delays for people looking to withdraw money from their pensions, because providers have been inundated with requests since October’s Budget.
“While prior to Christmas it would typically take around two weeks from receipt of the instruction or payment request, now it is nearer to six – we even had a case where it took two months for the client to receive their cash.
“It is no coincidence that this ties in with pensions being brought within individuals’ estates for inheritance tax purposes, from April 6, 2027. In response, many people have come to the conclusion that they would rather spend the money, so are looking to cash in on their pension savings.”
When savers reach aged 55, they are eligible to withdraw a quarter of their pension tax free as a lump sum, with those made after subject to income tax.
“Tax-free lump sums appear to be taking longer, as they are, by definition, free of any taxation consequences,” Mr Hough added.
He said: “Whether your pension provider is large or small, the delays are the same across the board. If you submit instructions, be prepared for the fact that it might take four or five weeks to complete, and speak to your financial advisor about the knock-on effect this may have for your financial situation in the coming months.”
The Treasury has been contacted for comment.
