Top 5 Ways The Budget Might Affect Your Pension And Retirement

As the Autumn Budget approaches, you might be feeling anxious about how it might affect your retirement plans, and more specifically your pensions.

While we can’t predict what this new Labour Government will do in their first Budget, we do know change is coming.

How big or how small these changes will be though, only Chancellor Rachel Reeves knows – and we’ll have to wait until 30th October to find out.

But, in the meantime, here’s the 5 most talked about areas that could potentially be impacted and what these changes might mean for you.

1. Changes to Pension Allowances

While there has been discussion about increasing the pension contribution limits, as of now, no concrete details are available until the Budget is announced. Speculation suggests that higher earners may benefit from an increase in allowances, which could improve opportunities for pension growth, but this remains to be confirmed.

For more details on current allowances, read our ‘Do You Know How Your Pension Is Taxed?’ blog here.

2. Changes to Tax-Free Lump Sum

The most notable rumour surrounding the Autumn Budget is the possibility of reducing the tax-free lump sum from the current 25% to a lower cap, possibly £100,000. This would impact up to one in five high earning retirees.

Another speculation is that the government could reduce the 25% tax-free cash to 20%, although this too is deemed risky for the Chancellor, so we won’t make any predictions on this one.

3. Adjustments to the State Pension

One of the most anticipated changes is the adjustment of State Pension rates. There’s a strong possibility of an increase in pension payments to help retirees keep up with the rising cost of living.

Currently the Government uses a system called the ‘triple lock’, which ensures pensions rise by the highest of inflation, average wage growth, or 2.5%. This is especially important because higher living costs can put pressure on your finances in retirement, so any help the Government can give will go a long way.

4. Tax Relief

Tax relief on pension contributions is under review, and there’s a growing conversation about making this system fairer for everyone. Right now, higher earners benefit the most from tax relief, which can leave others feeling left out.

This Budget might introduce changes to incentivise more individuals, regardless of income, to invest in their pension plans – with the intended outcome being that more people can retire with more money in the future.

5. Support for Defined Benefit (DB) Schemes

There may be initiatives aimed at bolstering Defined Benefit schemes, which promise a specific pay-out at retirement. With recent concerns over the sustainability of these DB plans, the Chancellor might implement measures to protect them and ensure that pensioners get the benefits they were promised—which would be welcome news, we’re sure.

Preparing for Changes

At Joslin Rhodes, we know that new Budget policies can bring both opportunities and uncertainties. And while we may not have all the answers yet, we do know that we can help you manage your pensions and retirements, regardless of whatever comes our way.

So, whether you’re considering adjustments to your retirement strategy or seeking advice on maximising your pension, our team is here for you.

Get in touch with us today. 

Image used in header courtesy of Jessica Taylor, available on Wikimedia Commons: https://commons.wikimedia.org/wiki/File:Rachel_Reeves,_Keir_Starmer_and_Angela_Rayner.jpg 

Photo licensed under CC BY 3.0 by UK Parliament: https://creativecommons.org/licenses/by/3.0/ 

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