With us moving closer to the October Budget, Prime Minister Sir Keir Starmer and Chancellor of the Exchequer Rachel Reeves are already targeting pensioners with their cost-reducing measures.

Sagar Dholiwar (Head of Corporate Clients) dives into the rumours media outlets are circulating around the government and pensions, and what it could mean for you.

It is important to note that the following points from all commentators are views and thoughts on areas the Labour government may or may not review in the upcoming Budget. These are not based on current legislation, or on factual information. We do not advise acting on this information – instead, please speak to your Courtiers adviser or contact us.

The Prime Minister and Chancellor are already targeting pensioners with the removal of the Winter Fuel Allowance. Although many with other sources of pension and non-pension income will remain comfortable, some feel the policy has not been thought through well enough. The impact for some pensioners this winter could be devastating, especially as the energy price cap is likely to rise by 10%.

The upcoming Budget could well include targeting pensions further. However, how they will do so at this stage is very unclear. The following could be under review:

• Annual Allowance changes. The Conservative Party increased the limit on pension contributions each year from £40,000 to £60,000 per annum from 2023/ 24. Reversing, or significantly reducing, this annual allowance would typically limit higher earners from paying more into long-term tax efficient vehicles. This would immediately raise greater tax revenues, with little public opposition.
• A flat rate of tax relief? Rachel Reeves previously proposed changing the amount of tax relief on pension contributions to a “flat rate of tax relief” of 33% for all who contributed into a pension. This would be great for basic rate taxpayers. Conversely, it would be extremely unpopular with higher and additional tax rate payers, although there may be some scope for higher-earner contributions, depending on when such changes are implemented.
• Pension tax free cash. Perhaps the most unpopular step in trying to raise additional sums from pensioners would be limiting the 25% tax free pensions component. Some rumours have included the reduction of the current 25% lump sum to 20%. However, this seems strange given that the UK population are not paying enough into their pensions for retirement. The government should be well aware of this issue. It makes more sense to continue to keep this attractive feature in place, to encourage necessary long-term savings/ investment into pensions.

Another contentious area in relation to lump sums would be to adversely affect those who have historically planned ahead and applied for specific lifetime/ lump sum protections.

Although retrospective changes are unlikely, we await greater clarity to put minds at ease. This will allow us to plan as effectively as possible and take advantage of any windows of opportunity.

Working with Courtiers

This is why it’s beneficial to work with Courtiers in the run up to the Budget, and after. We can help support you and your wealth in the following ways:

• Ensuring we have strategies in place to deal with and respond to any changes.
• Taking all necessary steps to keep your wealth protected while adhering to legislation.
• Offering continued and up-to-date advice to support your financial decisions.
• Offering you bespoke product advice based on your specific needs.

Conclusion:

We are monitoring developments in the background, and when we know what will happen for definite, we will pass this information on to you. For now, we will adhere to current legislation while focusing on the best course of action.

If you have any questions in the run-up to this year’s Autumn Budget, please speak to your Courtiers Adviser or contact us.