Budget kite-flying ‘damaged’ pensions as worried savers withdrew cash early,

Pensions have been ‘damaged’ by Labour’s pre-Budget kite-flying as savers pulled out cash early fearing a tax raid, the boss of a leading wealth manager warned.

Mark Fitzpatrick, chief executive of St James’s Place, said hundreds of thousands of people had drawn down from retirement funds as fears of a financial black hole in the Budget stoked the speculation.

However, it ultimately emerged that the public finances had deteriorated less than feared.

Worries that the Chancellor would stage a raid on pension lump sum withdrawals did not come to pass.

But those who acted on those fears by pulling out cash have now found themselves missing out on the benefits of leaving their money in their retirement funds.

Mr Fitzpatrick, whose firm manages funds totalling nearly £200billion on behalf of more than a million clients, said the pre-Budget speculation echoed last year’s event but lasted even longer.

He said he had asked the government to try and limit such periods ‘because people act on speculation and if they take money out of their pension prematurely then they’ve damaged their pensions going forward’.

Mr Fitzpatrick told BBC: ‘It happened last year, significantly – hundreds of thousands of people drew down prematurely. This year as well it’s happened.

‘So people’s pensions have been damaged due to the speculation.’

Mr Fitzpatrick said financial advisors had helped some avoid taking unwise decisions to take out tax-free cash.

And he added: ‘The Government is aware… the speculation that has been out, the flying of kites, is unhelpful when it affects people’s lives.

‘It’s so important for pensions which are a long, long term investment, where people are saving for 30, 40 years, to have confidence in that – because when you retire you want to know that actually your pension is going to be in tact so that you and your family have something to live off, to enjoy.

‘Picking away at that every year is incredibly unhelpful.’

The comments are the latest from a City boss to criticise months of ‘kite flying’ – policies floated by Whitehall insiders ahead of the Budget to gauge reaction.

Earlier this week, Steven Fine, chief executive of broker Peel Hunt, said ‘kite-flying is never a good strategy over a prolonged period of time’.

And a Confederation of British Industry (CBI) survey revealed the worst slump in private sector activity since the pandemic as pre-Budget uncertainty left firms in ‘limbo’.