The Treasury has reportedly rejected moves to reduce or axe the pensions tax free lump sum, according to a report in the Daily Telegraph.

The newspaper says that Treasury officials have told them that a raid on the lump sum is not planned for the Budget on 26 November.

There has been speculation that Chancellor Rachel Reeves could scale back significantly the tax free lump sum which allows pension savers to withdraw 25% of their pension pot tax free.

Some pension providers have reported a wave of enquiries from customers asking how to withdraw their lump sum and some pension savers have already pulled out all or part of the money.

Ms Reeves was reportedly considering reducing the tax free lump sum significantly, potentially with a much lower cap of £100,000, to save the Treasury money.

However it now appears unlikely that she will significantly reform the pensions tax free lump sum in this Budget although measures to raise tax and reduce tax relief in other areas of pensions, such as salary sacrifice, are considered possible.

The tax free lump sum rules enable pension savers to withdraw 25% of their pension pot after the age of 55, subject to a maximum withdrawal of £268,275.

The Telegraph reported: “Rachel Reeves will not cut the tax-free pension lump sum limit in the Budget this month, officials have confirmed...The Chancellor had been understood to be considering reducing the allowance in a bid to help plug a black hole of up to £30bn in the public finances.”

Speculation continues to circulate that salary sacrifice may come in for scrutiny from the Chancellor and National Insurance could be extended to higher earning pensioners and business owners.

Generally, most Budget rumours prove to be incorrect or exaggerated although the Chancellor has made it clear that she needs to raise more money from taxation so some changes are almost inevitable.