Investors are withdrawing money from their pension pots in increasing numbers, fearing potential tax rises in the upcoming budget.

AJ Bell, one of the UK’s largest DIY wealth managers, has reported a significant uptick in pension withdrawals, as clients move to secure tax-free lump sums ahead of possible changes by the government.

Michael Summersgill, AJ Bell’s chief executive, noted “a noticeable change in both customer contributions to pensions and tax-free cash withdrawals” as speculation grows that Chancellor Rachel Reeves may reduce the current tax-free limit. Under existing rules, savers aged 55 and over can withdraw up to 25% of their pensions tax-free, with a cap set at £268,275. However, rumours of a lower cap have led many clients to cash in on this allowance before the October 30 budget.

In addition to increased withdrawals, some customers are accelerating pension contributions amid concerns that the government may alter tax relief on pensions. “Many are taking advantage of the current system before potential changes come into effect,” an AJ Bell spokesman said.

Despite the changing customer behaviour, Summersgill insisted that the shifts do not materially impact AJ Bell’s overall performance but warned that “these are significant decisions for individual customers.” He called on the Treasury to implement a “pension tax lock” in the budget to ensure stability in pension tax legislation for the remainder of this parliament.

The uncertainty surrounding the budget has also affected other investment platforms. Vanguard has reported a surge in customers making full use of their tax-free allowances in Isas and self-invested personal pensions (Sipps), as investors seek to safeguard their savings from potential tax hikes.

The mounting speculation of tax increases comes as Labour prepares to deliver its first budget since taking office in July. Both Reeves and Sir Keir Starmer have warned of “difficult decisions” ahead to fill a gap in public finances, with expectations that higher earners may face additional burdens.

AJ Bell’s core platform business, which allows individuals to manage investments, shares, Sipps, and Isas, has continued to grow despite the tax anxieties. The platform attracted 66,000 new customers in the year to September 30, taking its total client base to 542,000. This growth helped drive a 22% increase in assets under administration, reaching a record £86.5 billion.

AJ Bell’s smaller investment management division also saw substantial growth, with assets under management rising by 45% to £6.8 billion over the past 12 months. Analysts at Jefferies described the company’s fourth quarter performance as “solid,” although shares in AJ Bell dipped by 5p, or 1%, to 476p following the trading update.

As the budget approaches, the financial sector remains on edge, with investors closely watching for any changes that could affect their pensions and savings.