Financial experts are urging pension holders to take immediate action ahead of the government's Autumn Budget, with three crucial options to consider before the end of November.
Potential pension reforms loom
Chancellor Rachel Reeves is set to deliver the Autumn Statement on November 26, and specialists at financial planning firm Capital for Life warn that significant pension changes could be announced. Carlton Crabbe, a finance and insurance expert with the firm, highlighted the heightened stakes this year.
"Each Autumn Statement brings whispers of reform, but this year, the stakes are higher," Mr Crabbe stated. "With the UK facing an ageing population, rising life expectancy, and persistent fiscal pressures, pensions are an increasingly tempting target for tax policy changes."
Key areas under threat
Several pension benefits could face modification in the upcoming budget. Mr Crabbe identified three main areas of concern:
First, the government might consider cutting the higher rate tax relief on pension contributions, which would particularly affect higher earners.
Second, there's potential for changes to the 25 per cent tax-free lump sum that people can currently withdraw from their pension pots.
Third, and perhaps most significantly, pensions could become liable for inheritance tax. Mr Crabbe explained: "Currently, pension assets often fall outside the IHT net, making them one of the most efficient vehicles for intergenerational wealth transfer. Changing that rule would significantly reshape estate planning strategies."
Three protective strategies
Mr Crabbe recommends three immediate actions for pension holders:
Diversify your savings: "Don't rely solely on pensions; consider ISAs, investment bonds, or protection plans to spread your risk." ISAs provide a tax-efficient alternative as investment growth and interest earnings within them remain tax-free.
Regular professional reviews: "Policy changes happen fast. Regularly review your pension strategy with a financial adviser to identify tax-efficient opportunities."
Create alternative income streams: "If the triple lock or tax-free lump sum is altered, having alternative income sources can cushion the blow."
The pension expert concluded: "The Autumn Statement is a reminder that pension policy is never static. The best defence isn't guessing what will change, but maintaining a flexible, well-diversified plan that can adapt when it does."
