Wealth managers have accused Labour of making a “hot mess” ahead of the Budget.
With days to go until Rachel Reeves’s first Budget, advisers say that the lack of direction around what will be announced is creating issues for savers.
The City watchdog has this week issued fresh guidance to financial advisers being approached by panicked clients.
So far reports suggest that the Chancellor will increase capital gains tax on non-property investments, with inheritance tax and pensions also facing a raid by the Treasury.
Toby Tallon, of wealth manager Evelyn Partners, said: “It’s a hot mess. The constant chopping and changing of narrative has created worrying levels of uncertainty.
“It appears to me that there are only 10 or 20 people who really know what is going to be in the Budget, and not even they seem very sure themselves; that lack of clarity isn’t helping the confidence of business owners and investors.”
Amid the uncertainty, the Financial Conduct Authority (FCA) has updated its website with guidance for providers on what to do when a client asks to withdraw their tax-free cash “which may result in poor outcomes”.
The new section has been added to a page advising providers on the line between advice and guidance when discussing financial matters with customers.
The FCA suggests that firms can identify relevant risks of taking a lump sum, such as the potential adverse tax consequences, impact on income during retirement and the irreversible nature of the decision, without giving unregulated advice.
Government advice website MoneyHelper has also updated its website with a warning about making any significant financial decisions ahead of the Budget. A post on the site reminds readers that while there is a rumour that “the 25pc tax-free pension lump sum might be at risk”, nothing has been announced or confirmed and as such there is no need to make “quick decisions” about your pension now.
News that the Chancellor is considering a cut to the tax-free lump sum that savers can take from their pensions, has caused an increase in retirees accessing the money ahead of any change.
In September Interactive Investor, an online investment platform, saw a 58pc increase in the volume of cash withdrawals from self-invested personal pension (Sipp) accounts that make up the 25pc tax-free lump sum allowance, compared to the same period last year.
At the moment, most savers can take 25pc of their pension pot tax-free once they reach the age of 55, up to a maximum of £268,275.
Megan Rimmer, chartered financial planner at Quilter Cheviot, said: “For as long as I’ve been advising clients, Budget rumours have always triggered anxiety, but none more so than the current speculation.
“As we approach the Budget, the air is thick with concerns over potential tax changes – especially around pensions – leading to many anxious calls from clients.
“Naturally this has led to people wanting to make rash decisions with their finances that they may come to regret.
“Some clarity would be beneficial but the truth is you should only make decisions on your finances based on hard facts and therefore at the moment it is not wise to make any rushed decisions.”
The Government was contacted for comment.
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