Chancellor, Rachel Reeves, will not make any changes to the tax-free pension lump sum allowance in the upcoming Budget, officials have confirmed.

The Telegraph has reported that the Treasury has ruled out making these changes.

Currently, most savers can take 25 per cent of their pension pot tax-free once they reach the age of 55, up to a maximum of £268,275.

There were rumours that Reeves was considering reducing this allowance in order to recover the £30bn black hole in the public finances. As a result, many retirees have rushed to draw down funds early to beat any potential tax changes.

However, The Telegraph has stated that the Chancellor is considering a strip back on tax breaks offered to staff and employers that pay money into workplace pensions in a move that could cost the average worker £210 a year.

Furthermore, the government is also understood to be planning a 2p increase to income tax mitigated by a 2p cut to national insurance on earnings between £12,571 and £50,270, which would mean workers who are basic-rate taxpayers seeing no impact on their take-home pay.

AJ Bell director of public policy, Tom Selby, said that attacking tax-free cash in the Budget would have been a "massive own goal" and likely have led to further industrial action from public sector trade unions.

He stated: "No change to tax-free cash entitlements at the Budget is clearly good news but what we really need from this government is a lasting commitment to long-term stability so people can plan for the future with confidence.

"While any changes to pension tax relief would almost certainly come with protections for those close to retirement, it is entirely understandable that people are concerned by the speculation witnessed in recent months. When you save diligently throughout your career you deserve the right to plan ahead without the threat that government may move the goalposts before you can access your money.

"Constant rumour and speculation will damage confidence in long-term saving, lead people to make short-term decisions that may be bad for their long-term financial health, and cause wariness about household spending choices for fear government tinkering may upend financial plans."

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