British pension savers are being warned to urgently review their retirement plans as Chancellor Rachel Reeves prepares to unveil potentially sweeping changes to pension rules in her Autumn Budget later this month.
Major Pension Changes Looming
Financial experts are sounding the alarm that the Chancellor's announcements on Wednesday, November 26 could significantly impact both private and state pensions. Higher-earning workers are expected to bear the brunt of any changes, with speculation mounting about potential limits to tax-free pension lump sums and adjustments to the state pension triple lock mechanism.
Although final decisions remain unconfirmed, specialists emphasize that now represents a critical window for individuals to assess their pension contributions and current tax status before any new rules take effect.
Urgent Action for Higher Earners
Rajan Lakhani, a personal finance expert at savings platform Plum, strongly advises higher-rate and additional-rate taxpayers to maximize their pension contributions while existing regulations remain in place. "If you have a personal pension and are a higher-rate or additional-rate taxpayer, make sure you're contributing as much as you can afford," he stressed.
Lakhani highlighted the dual benefit of pension contributions: "You receive tax relief on your contributions, and for some people this can help prevent them moving into a higher tax bracket. With the Chancellor expected to freeze tax bands again, that will be even more important."
The current frozen thresholds until April 2028 mean the higher-rate threshold begins at £50,271, while the additional-rate threshold starts at £125,140. Workers earning £100,000 or more face the gradual loss of their tax-free personal allowance, with complete loss occurring at £125,140.
Claim Your Missing Tax Relief
Many higher earners are missing out on significant pension benefits simply because they fail to actively claim what they're owed. While basic-rate tax relief of 20% is automatically added to personal pension contributions, higher and additional rate taxpayers must take extra steps.
"Everyone gets 20% basic tax relief automatically added to their personal pension contributions," Lakhani explained. "This means for every £80 you pay into your personal pension, you get £20 tax relief added automatically, meaning the total amount contributed is £100. But that means higher or additional rate taxpayers don't have their total tax relief automatically added. So they need to claim back the extra from HMRC through a self-assessment form, otherwise they will miss out."
State Pension Uncertainty
Savers are also being encouraged to verify their National Insurance records to ensure they're on track to receive the full new state pension, currently valued at £230.25 per week. Achieving full entitlement typically requires 35 qualifying years of NI contributions.
While the state pension is projected to increase by 4.8% next April under the triple lock system, official confirmation won't arrive until the Autumn Budget announcement. This leaves millions of pensioners and those approaching retirement in suspense about their future income.
With the Budget presentation just weeks away, financial advisors unanimously recommend taking proactive steps now rather than waiting for potentially unfavourable changes that could diminish retirement prospects for years to come.
