Chancellor Rachel Reeves is set to deliver the first budget of the new Labour government next month – and there are fears she could make more changes to pensions.

Prime Minister Keir Starmer has already warned ‘painful decisions’ will need to be made in the October 30 budget, with Labour claiming public finances face a £22bn black hole after 14 years of Conservative government.

Many pensioners already fear being hit in the pocket after the winter fuel payment was made means-tested, meaning millions of people will no longer receive the benefit, which was previously universal.

But there are fears that pensions and savings could be set for a further battering in the Autumn budget.

One of the areas where there are fears change could be on the way is how much people can take out of their pensions as a tax-free lump sum.

Keir Starmer has warned the budget will be ‘painful’ (Image: Getty)

Under the existing rules, people over the age of 55 can take out up to 25 per cent of their pension pot as a tax-free lump sum – with the limit standing at £268,275.

In the run-up to the July election, Mr Starmer was asked about the tax-free lump sum scheme,

He said: “It runs out in a number of years and we’re not going to renew it.”

Labour was quick to backtrack on this comment.

A spokesperson said at the time: “The ability to withdraw 25% of your pension as a tax-free lump sum is a permanent feature of the tax system and Labour are not planning to change this.

“Keir was referring to temporary tax breaks in the system that are due to expire and which the public finances assume will not continue, like increasing the stamp duty threshold for first-time buyers from £300,000 to £425,000.”

There are worries the tax-free lump sum could be hit (Image: Getty)

While the scrapping of the scheme as a whole may be unlikely, it is possible the chancellor will lower the cap – a move that could prove unpopular with voters.

Speaking to YourMoney, Tom Selby, director of public policy at AJ Bell, said the move would also be ‘complicated’.

He added: “Those who have already built-up entitlements to tax-free cash under the existing rules could almost certainly need to be protected against a retrospective retirement tax.

“Furthermore, the overall amount people can access tax-free has already been scaled back significantly over the last 14 years, and if the current figure remains frozen, it will continue to be eroded in real terms.”

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Keir Starmer faces huge winter fuel payment rebellion as 50 MPs send warning

Sir Keir Starmer could face a rebellion of up to 50 Labour MPs in tomorrow’s crunch winter fuel payment vote.

Dozens of backbenchers are set to abstain when the measure to axe the payments for millions of pensioners comes to the House of Commons on Tuesday, while a handful are expected to vote against the policy.

It comes as Labour is facing a major backlash over plans to restrict the allowance to only those on pension credit.

Some 11 Labour MPs are among the 27 who have signed a Commons motion expressing concerns over the proposals.

Seven of the party’s MPs had the whip removed for voting to scrap the two-child benefit cap in July.

Sir Keir Starmer is facing a battle with MPs over his planned Winter Fuel Payment cut (Image: Getty)

The Prime Minister yesterday refused to say whether Labour MPs would be suspended from the party for voting against cuts to winter fuel payments.

He told the BBC: “That will be a matter for the chief whip.

“We’re going into a vote. I’m glad we’re having a vote, because I think it’s very important for Parliament to speak on this.

“But every Labour MP was elected in on the same mandate as I was, which was to deliver the change that we need for the country over the time we’ve got in office.

“I’m absolutely convinced that we will only deliver that change, I’m absolutely determined we will, if we do the difficult things.

“Now, I know they’re unpopular, I know they’re difficult. Of course they’re tough choices.”

Sir Keir also admitted his new government would be “unpopular” as he sought to defend the controversial decision.

He said: “We’re going to have to be unpopular. Tough decisions are tough decisions. Popular decisions aren’t tough, they are easy.

“When we talk about tough decisions, I’m talking about tough decisions, the things the last government ran away from, that governments traditionally run away from.

“I’m convinced that because they’ve run away from difficult decisions, we haven’t got the change we need for the country.”

Chancellor Rachel Reeves sparked a backlash in July when she announced plans to limit previously universal winter fuel payments.

She blamed a £22 billion black hole in the public finances left by the Tories, which they have denied.

The move is expected to reduce the number of pensioners in receipt of the up to £300 payment by 10million, from 11.4million to 1.5million – saving around £1.4billion this year.