Autumn budget 2024: What does it mean for pension planners?

After years of economic turbulence and financial strain for households across the UK, this Budget felt like a truly pivotal moment. Marking the first Labour Budget in over 14 years and delivered by the UK’s first female Chancellor, Rachel Reeves, it was more than just a list of fiscal measures – it was a signal of the new government’s approach to Britain’s economic recovery and future stability.

For retirement planners, especially, this Budget carried significant weight. After weeks of speculation many were watching closely to see how pensions and personal finance would be addressed.

We take a look at the key takeaways for Britain’s pension planners…

Key points that could affect your retirement plan

Pensions and inheritance tax (IHT)

One of the most talked-about measures was the decision to include pensions in the scope of inheritance tax from 2027. This adjustment means that pension savings may be subject to the 40% tax rate if the total estate value exceeds the IHT threshold, impacting how people approach estate and retirement planning. With the new rules, individuals may need to reconsider the balance of their savings, investments, and asset transfers to minimise potential IHT liabilities if it was factored into their plans.

Triple Lock confirmation

The government had already committed to the triple lock in the party manifesto. However, Rachel Reeves’ commitment to the policy will provide welcome reassurance to pensioners. This means that the state pension payment rates will rise by 4.1% in line with average earnings, with some pensioners receiving an increase of up to £475 in 2025.

Pension credit

For lower-income retirees, the Pension Credit Standard Minimum Guarantee will also increase by 4.1% from April 2025, meaning an annual increase of £465 in 2025-26 in the single pensioner guarantee and £710 in the couple guarantee.

Inflation forecast

The Chancellor has retained the Bank of England’s 2% inflation target, but the Office for Budget Responsibility (OBR) projects that inflation will remain above target over the next four years. Inflation is expected to average 2.5% this year and rise to 2.6% in 2025 before gradually decreasing but staying slightly above 2% until at least 2028. For savers, this underscores the need to stay vigilant about inflation’s impact on long-term savings.

National minimum wage

The Chancellor’s announcement of a minimum wage rise to £12.21 for over-21s from April 2025 could indirectly impact retirement planning. For those on minimum wage, this 6.7% boost in income may open up opportunities to allocate more towards pensions and savings.

Our perspective

Even though drastic pension tax changes didn’t materialise in today’s Budget, the damage has already been done. Weeks of speculation and rumoured sweeping reforms left savers anxious, will have shaken many people’s retirement strategies. For those already wrestling with financial difficulties, this added uncertainty will have only deepened concerns about their future security.

A confirmation of their already-pledged commitment to the triple lock and an increase in pension credit are welcome if underwhelming. But it is not enough. The government now has an opportunity to rebuild that trust by focusing on initiatives that genuinely support savers – starting first with helping savers to understand how bringing pensions into IHT could impact future financial planning.

Finally, prioritising comprehensive financial education and tools like the long-delayed pension dashboard will empower people to make informed decisions and feel confident in their retirement planning. What’s more, the second half of their pension review must deliver more than just lip service – savers need real, actionable reforms that encourage greater contributions and improve outcomes for retirement planning across the board.

A nod to either of these engagement-boosting policies would have been a welcome announcement that could have alleviated some of the pension tax raiding fears.

It’s now crucial that the Chancellor recognises the importance of stability and clarity in pension policy. Restoring confidence among savers will require transparent, considered policies that support long-term financial well-being rather than fuelling rampant speculation that only undermines it.