In one of the longest ‘Budget’ speeches in memory, Chancellor Rachel Reeves gave the first Labour Budget speech for nearly 15 years on 30 October 2024.  

Here we’ve summarised the main elements of interest for financial planning, with further details on tax rates and allowances for 2025/26 (to compare to 2024/25) available on the government website.  

If you have any concerns or questions about any of the announcements and would like to speak to one of our expert financial advisers, contact us for a free initial consultation to see how we can help.

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Non- domicile changes

The non-domicile tax regime is to be abolished from 6 April 2025. Domicile will no longer be a feature of the UK tax system and will be replaced by a system based on residency.

The government will:  

• Introduce a new 4-year foreign income and gains regime for new arrivals who have not been UK tax resident in the previous 10 years
• Allow individuals previously taxed on the remittance basis to remit pre-6 April 2025 foreign income and gains using a new Temporary Repatriation Facility
• Reform Overseas Workday Relief
• Replace the domicile-based system for inheritance tax with a residence-based system

VAT on private school fees

From January 2025, 20% VAT will apply to private school fees across the UK and the business rates charitable rates relief for private schools in England will be removed.

Income tax and personal National Insurance (NI)

Income tax bands and personal NI thresholds remain frozen until April 2028. This time period hasn’t been extended and from 2028/29 these bands/thresholds will increase with inflation.

Capital gains tax (CGT) changes

Investors’ Relief

Investors’ Relief (IR) provides for a lower rate of CGT to be paid on the disposal of ordinary shares in an unlisted trading company where certain criteria are met, subject to a lifetime limit of £10 million of qualifying gains for an individual.

This measure reduces the lifetime limit from £10 million to £1 million for IR qualifying disposals made on or after 30 October 2024.

CGT rates

The main rates of Capital Gains Tax (that apply to assets other than residential property and carried interest), will increase from 10%/20% to 18%/24% respectively for disposals made on or after 30 October 2024.

The main rate of Capital Gains Tax that applies to trustees and personal representatives will increase from 20% to 24% for disposals made on or after 30 October 2024.

The rate of Capital Gains Tax that applies to Business Asset Disposal Relief and Investors’ Relief is increasing to 14% for disposals made on or after 6 April 2025 and from 14% to 18% for disposals made on or after 6 April 2026.

Carried interest

Carried interest, which is a form of performance-related reward received by fund managers, primarily within the private equity industry, will be subject to a CGT rate of 32% from April 2025 (current rates are 18% and 28%). From April 2026, carried interest will be subject to a revised regime within the income tax framework.  

Inheritance tax (IHT) changes

Freezing of IHT thresholds

The Inheritance Tax thresholds were already fixed at their current levels until April 2028. This time period has been extended to April 2030. This measure will fix the:

• Nil-rate band at £325,000
• Residence nil-rate band at £175,000
• Residence nil-rate band taper, starting at £2 million

Inherited pensions

From 6 April 2027, when a pension scheme member dies with unused funds or without having accessed all of their pension entitlements, those unused funds and death benefits will be treated as being part of that person’s estate and may be liable to Inheritance Tax. The current distinction in treatment between discretionary and non-discretionary schemes will be removed.  

The change will apply to both DC and DB schemes. It will apply equally to UK registered schemes and QNUPS. This will ensure that most pension benefits are treated consistently for Inheritance Tax purposes, regardless of whether the scheme is discretionary or non-discretionary, DC or DB.  

A small number of specified pension benefits will remain outside scope for Inheritance Tax, including where funds can only be used to provide a dependants’ scheme pension. These are currently out of scope in non-discretionary schemes and so will remain out of scope under this change.  

Pension scheme administrators will become liable for reporting and paying any Inheritance Tax due on pensions to HMRC. This will require pension scheme administrators and personal representatives to share information with one another.  

A technical consultation has been issued on the processes required to implement these changes for UK-registered pension schemes. After the consultation, the government will publish a response document and carry out a technical consultation on draft legislation for these changes in 2025.

The government will continue to incentivise pension savings for their intended purpose of funding retirement, supported by ongoing tax reliefs on both contributions into pensions and on the growth of funds held within a pension scheme.  

Agricultural relief and business relief  

From 6 April 2025, the existing scope of agricultural relief will be extended to include land managed under an environmental agreement with, or on behalf of, the UK government, devolved governments, public bodies, local authorities, or relevant approved responsible bodies.  

From 6 April 2026, agricultural relief (AR) and business relief (BR) will be reformed, as summarised below:

• The 100% rate of relief will continue for the first £1 million of combined agricultural and business property to help protect family farms and businesses, and it will be 50% thereafter.  
• The rate of business relief will reduce from 100% to 50% in all circumstances for shares designated as “not listed” on the markets of recognised stock exchanges, such as AIM.  

The reforms are expected to only affect around 2,000 estates each year from 2026/27, with around 500 of these claiming agricultural relief and around 1,000 of these holding shares designated as “not listed” on the markets of recognised stock exchanges.  

The government will publish a technical consultation in early 2025. This will focus on the detailed application of the allowance to lifetime transfers into trusts and charges on trust property. This will inform the legislation to be included in a future Finance Bill.

More detail is available at gov.uk. 

National insurance

Employer NI is to increase to 15% (from 13.8%) from April 2025 and the secondary threshold will reduce to £5,000 (from the current £9,100), i.e. employer NI will become payable on an employee’s earnings above £5,000pa.

The Employment Allowance, a National Insurance exemption for smaller businesses, will increase to £10,500 (from £5,000).  

Pensions

Qualifying recognised overseas pension scheme (QROPS)

The Overseas Transfer Charge (OTC) is a 25% tax charge on transfers to QROPS, unless an exclusion from the charge applies.

The government has announced that they are removing the exclusion from the OTC for transfers made on or after 30 October 2024 to QROPS established in the EEA and Gibraltar.

Also, from 6 April 2025, the conditions of OPS and ROPS established in the EEA will be brought in line with OPS and ROPS established in the rest of the world, so that:  

• OPS established in the EEA will be required to be regulated by a regulator of pension schemes in that country
• ROPS established in the EEA must be established in a country or territory with which the UK has a double taxation agreement providing for the exchange of information, or a Tax Information Exchange Agreement

From 6 April 2026, scheme administrators of registered pension schemes must be UK resident.  

Aligning the treatment of transfers to QROPS established in the EEA and Gibraltar with that of transfers to QROPS established in the rest of the world will help to ensure that some UK residents do not benefit from a double tax-free allowance whilst remaining in the UK and reduces the risk of around £1 billion of UK tax-relieved pension savings being transferred overseas across the scorecard.

Changing the conditions EEA schemes need to meet in order to become an OPS or ROPS will mean that they will have to meet the same conditions as those which are established anywhere else in the world.

Requiring scheme administrators of registered pension schemes to be UK resident will mean that all administrators of registered schemes will need to meet the same conditions.    

Further details are available at gov.uk. 

Employee Ownership Trusts and Employee Benefit Trusts

Targeted reforms are to be made to the Employee Ownership Trust tax reliefs to ensure that the reliefs remain focused on the intended purpose of encouraging and supporting employee ownership, whilst preventing opportunities for the reliefs to be abused to obtain tax advantages outside of these intended purposes.

Details are available at gov.uk

Stamp Duty Land Tax (SDLT)

The higher rates of Stamp Duty Land Tax (SDLT) for purchases of additional dwellings (second properties) and for purchases by companies is increasing from 3% to 5% above the standard residential rates of SDLT.  

This measure also increases the single rate of SDLT payable by companies and other non-natural persons purchasing dwellings over £500,000, from 15% to 17%.  

Both changes apply to transactions with an effective date on or after 31 October 2024.  

National Minimum Wage

The National Living Wage will increase from £11.44 to £12.21 an hour from April 2025.  The National Minimum Wage for 18 to 20-year-olds will also rise from £8.60 to £10.00 an hour.

State benefit and state pension increases

From April 2025, a 4.1% increase to the basic and new State Pension meaning the full new State Pension will rise from £221.20 to £230.25 a week, while the full basic State Pension will increase from £169.50 to £176.45 per week.

The Pension Credit Standard Minimum Guarantee will 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.

Working-age state benefits and the Additional State Pension will rise by 1.7% in April 2025, in line with inflation.

Furnished holiday lettings (FHL)

As previously announced, the furnished holiday lettings (FHL) tax regime will be abolished from April 2025, removing the tax advantages that landlords who offer short-term holiday lets have over those who provide standard residential properties.

The current rules provide beneficial tax treatment for furnished holiday lettings compared to other property businesses in broadly four key areas:

• Exemption from finance cost restriction rules (which restrict loan interest to the basic rate of Income Tax for other landlords)
• More beneficial capital allowances rules
• Access to reliefs from taxes on chargeable gains for trading business assets
• Inclusion as relevant UK earnings when calculating maximum pension relief

The abolition of the FHL regime will mean that income and gains will then:

• Form part of the person’s UK or overseas property business
• Be treated in line with all other property income and gains

If you’d like to discuss any of the changes announced in the Autumn Budget or would simply like to explore ways that you can minimise the amount of tax you pay on your wealth, why not get in touch and speak to one of our expert team of advisers. We’re offering anyone with £100,000 in savings, investments or pensions a free financial review worth £500.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. 

The Financial Conduct Authority (FCA) does not regulate cash flow planning, estate planning or tax. 

The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. 

Nearly 4 months after the general election, Chancellor Rachel Reeves finally delivered her eagerly anticipated Budget this afternoon.

It had been widely reported that there would be tax rises and speculation had been rife that pensions, capital gains tax and inheritance tax could be targeted to raise tax revenue following Labour’s manifesto commitment not to increase taxes on “working people”.

In the end, changes to all three of these areas were announced as Reeves looks to raise taxes by £40bn, though the changes were not to the extent that many had feared.

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Capital Gains Tax

The main rate of Capital Gains Tax will increase for basic rate tax payers from 10% to 18% and for higher rate tax payers from 20% to 24%. This change will take effect immediately. Capital Gains Tax on second properties will remain unchanged.

There had been rumours that capital gains tax rates would be equalised with income tax rates, so the changes could be viewed as relatively modest compared to potential increases of this level.

Pensions

Investors will have been pleased to see that no changes were announced to the maximum tax free cash that can be taken from pensions or the tax relief available on pension contributions. However, it was announced that unused pension funds and death benefits payable from a pension will be included in the value of estates for inheritance tax purposes from 6 April 2027. This will affect individuals who were previously planning to leave their pensions to beneficiaries rather than to spend them in their lifetimes, though income taken from pensions in excess of tax free cash entitlements is subject to income tax and will then form part of the estate for inheritance tax purposes if not spent, so careful planning will be needed to ensure funds are not taxed twice.

Inheritance Tax

Aside from inherited pensions entering the estate for inheritance tax purposes in 2027, there were a couple of additional changes to inheritance tax rules.

Firstly, the freezing of the nil rate band (£325,000) and Residence Nil Rate Band (£175,000) until 2030 was announced. For reference, the Residence Nil Rate Band is generally available when a main residence is passed to direct descendants and this, combined with the nil rate band, generally gives married couples £1m which can be passed to direct descendants inheritance tax free on the second death of them both.

Additionally, there had been rumours that the inheritance tax break on shares listed on the Alternative Investment Market (AIM), if held for two years before death, would be scrapped. However, the Chancellor instead took a ‘half way’ approach by introducing a 20% inheritance tax rate in respect of these shares.

The Chancellor also announced changes to two lesser-known inheritance tax reliefs, Business Relief and Agricultural Relief, which will now be subject to a 20% inheritance tax charge on qualifying asset values over £1 million.

Income Tax, Employee’s National Insurance and VAT

As expected there were no increases in these three areas given they affect “working people”. However, with income tax bandings already frozen until 2028, there was an expectation the Chancellor may extend this date, but this did not prove to be the case, as the Chancellor confirmed the freezing of these bandings would end in 2028.

Given the above changes were not to the level expected, how has the Chancellor raised £40bn?

Employer’s National Insurance

A large proportion of this £40bn (an estimated £25bn) will be funded by a large increase in employer’s National Insurance contributions from 13.8% to 15% and a reduction in the threshold from which these are paid from £9,100 to £5,000.

Stamp Duty on second properties

Landlords will be disappointed to see the stamp duty surcharge on second properties increasing from 3% to 5% with effect from 31 October.

Non-Dom tax status abolished

As expected, the Chancellor confirmed Labour’s plans to abolish “non-dom” tax status.

Overall, after weeks of speculation, the tax rises announced in the budget were not to the extent that many had feared. Individuals with pensions will be relieved to see no reduction in their maximum tax free cash entitlement and no change to the tax relief they can receive on pension contributions. Investors may also feel increases in capital gains tax rates could have been worse. Instead, businesses were left to fund the majority of the tax rises through their National Insurance contributions.

However, these changes to inheritance tax, pensions and capital gains tax rules will mean financial plans will need to be revisited. To discuss the implications of the budget for your personal financial situation, please contact your TPO Independent Financial Adviser.

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The Financial Conduct Authority (FCA) does not regulate estate planning or tax advice.

This article is intended as information only and does not constitute financial advice.  

The opinions shared in this article are solely those of the individual and they do not necessarily reflect those of The Private Office.

The information contained in this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.

In today’s complex financial landscape, the issue of ‘ghost’ pensions - pension plans that exist on paper but are not actively funded nor ‘managed’ - has garnered increasing attention. As globalisation and the job universe evolves, so too does job mobility. As a result, many individuals find themselves grappling with lost or forgotten pension benefits. With this backdrop, it is easy to see how ghost pensions begin to emerge over time. This article delves into why the issue of ghost pensions is growing, the importance of finding lost pensions, and what steps to take once they are found.

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Why the issue of ‘Ghost Pensions’ is growing

Recent estimations by the Centre for Economics and Business Research revealed that 22% of UK workers believe they have lost a pension pot, with total misplaced retirement savings likely to exceed £50 billion. Between 2012 and 2017, the Government introduced auto-enrolment in stages, which involved a minimum commitment of 8% of a worker’s qualifying earnings being added to a workplace pension scheme (subject to conditions). Consequently, we have seen a significant uplift in the number of people putting money aside for their future. However, prior to auto-enrolment, only around half of UK employees had a workplace pension. 

Increased job mobility:

With auto-enrolment in mind, as individuals change jobs more frequently than in previous generations, they often leave behind pension plans that can become difficult to track. This is particularly true for younger workers who may work for multiple employers throughout their careers. Each transition increases the risk of losing track of benefits and in turn, this could eventually lead to a lower pot to fund your retirement if forgotten about.

Poor record-keeping: 

Many companies, particularly smaller ones or those facing financial difficulties, may not maintain accurate records of their pension plans. Over time, this neglect can lead to individuals losing track of their benefits, particularly if they do not receive regular statements or updates.

Aging population: 

As the baby boomer generation retires, the number of individuals searching for lost pensions is increasing. Many retirees are discovering that their pensions, which they believed would be a stable source of income, are actually ghost pensions due to lack of funding or proper management.
These three factors heighten the importance of ensuring you have a clear understanding of all the retirement benefits you have accumulated over your life, so that you know what is available to you in your years after work.

The importance of finding lost pensions

We are all busy people and as the weight of day-to-day life takes hold, people often tend to put bureaucratic, paperwork-heavy tasks to the bottom of the proverbial pile. However, your future self will one day thank you for taking the time to get ahead of your pension management as early as possible. 

Financial security: 

Pensions represent a significant part of an individual’s retirement income. Finding a lost pension can make a substantial difference in financial security during retirement. Many retirees rely on these funds to maintain their standard of living, and any lost benefits could dampen your retirement expectations.

Legal rights: 

Individuals have legal rights to their pension benefits, and understanding these rights is vital. Failing to locate and claim a pension can result in forfeiture of funds that the employee has earned over the years. Knowing your rights ensure you take necessary actions to reclaim your benefits.

Emotional well-being:

 The uncertainty surrounding lost pensions can lead to anxiety and stress, particularly as you approach retirement age. Finding and securing these funds can provide peace of mind, allowing retirees to focus on enjoying retirement rather than worrying about financial instability.

How to find a Ghost Pension

Finding a ghost pension can be a challenging task, but several strategies can help streamline the process:

1.  Start by collecting as much information as possible about your previous employment. 
   This includes:

• Names of past employers
• Dates of employment
• Job titles and departments
• Any pension scheme details you might remember

          2.  Check with Former Employers

Contact the HR department of your previous employers. They should be able to provide information about any pension schemes you were enrolled in. If the company has merged or gone out of business, try to find out who took over the pension obligations.

          3.  Use the Pension Tracing Service

The UK government offers a Pension Tracing Service, which is a free service to help you find lost pensions. Here’s how to use it:

• Visit the Pension Tracing Service website.
• Fill out a form with the details of your former employers.
• The service will help connect you with the pension scheme administrators.

What to do once you find your Pension

Once a ghost pension has been located, the next steps are crucial to ensure that benefits are secured:

Gather documentation: 

Collect all relevant documentation, including any statements or correspondence related to the pension. This may include records from previous employers, plan documents, and identification information. You can then provide the pension provider with the details to obtain your plan information.

Review your options:

Once you have clarity on your benefits, review your options. Depending on the plan, you will have a variety of income options available to you. These typically vary from each plan, and older pensions can have much more limited options available to you. Consider what features are right for you and whether this is offered in your existing arrangements. 

Stay informed: 

After reclaiming your pension, keep abreast of any changes to the plan or funding status. Regularly update your contact information with the pension plan administrator to ensure you receive timely communications.

Consider financial advice: 

Depending on the amount and nature of your pension, it may be beneficial to consult with a financial adviser. We at TPO provide holistic advice on pension and retirement planning to remove the anxiety you may have around your future. 

How we can help

Navigating the complexities of pensions is essential for securing a stable financial future in retirement. With the potential for lost or forgotten pension benefits increasing, it’s crucial to take proactive steps to locate and reclaim these funds. Utilising resources like the Pension Tracing Service, consulting with former employers, and exploring online databases can significantly help.

At The Private Office, we understand the challenges individuals face when planning for retirement, with our team of experienced financial advisors dedicated to helping clients navigate these complexities. If you’re concerned about your financial future, why not get in touch. We’re offering all those with £100,000 or more pensions, savings or investments a free cash flow forecast worth £500, to visualise if you’re on track for the retirement you want.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The Financial Conduct Authority (FCA) does not regulate cash flow planning.

The clock ticks down with only six months remaining to plug National Insurance (NI) gaps. The government is encouraging people to act now and check their National Insurance record as there is no guarantee of a further extension to the deadline.  

As discussed in our previous article on National Insurance contributions (NICs), the government extended the deadline for NI contributions from the original 31 July 2023 to 5 April 2025 to allow eligible individuals to retrospectively fill gaps in their National Insurance record for the period covering April 2006 to April 2016. This extension was intended to give people more time to fill gaps in their National Insurance record that would otherwise prevent them from accessing the full State Pension.  

Plugging the gaps online

Earlier this year, the government launched a tool enabling people to pay to fill in gaps online. So far, more than 10,000 payments totalling £12.5m have been processed, according to figures from HM Revenue and Customs (HMRC). However, many still have gaps in their National Insurance record and are at risk of losing out on their full State Pension.  

• Key figures from the new online service shows the majority of customers (51%) topped up one year of their NI record
• the average online payment is £1,193
• the largest weekly State Pension increase is £107.44

After the 5 April 2025 deadline, people will only be able to make voluntary contributions for the previous 6 tax years, in line with normal time limits.

About National Insurance Contributions

National Insurance is an umbrella term for universal health care, unemployment benefits and the public pension programme.

National Insurance contributions are a form of tax that employees and employers pay to the government through payroll deductions. NICs are paid automatically through the PAYE (Pay As You Earn) system, which deducts an amount based on a percentage of your income, and this generally continues until you reach retirement age. Employees are able to make additional voluntary payments to increase the pension amount that they will be entitled to receive.  

NICs are collected in order to fund various state benefits, such as the NHS and state pensions.  

There are many reasons why you might have gaps in your NICs. If you were unemployed, in education, took a career break to raise a family or even if you were not earning enough, you may have periods where no NIC payments were made. You need to have been paying NIC for at least 10 qualifying years in order to receive any kind of State Pension, and you need to have been paying for a full 35 years to receive the maximum amount possible.

If you’re thinking about your retirement options and would like to speak to someone to map out your financial future, why not get in touch. We’re offering anyone with £100,000 or more in pensions, savings or investments a free review worth £500.  

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. 

In order to prepare for later life, we’re often told to put aside as much as possible into our pension pots. But is it possible to overpay into our pensions? And can this have a knock-on effect when it comes to the tax we pay?

It’s important to know the rules around how much you can pay into your pension, and the tax considerations. 

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What is the pension annual allowance?

In the UK, there is no limit on the amount of money taxpayers can pay into their pension annually. However, there is a limit to how much you can contribute tax-efficiently. 

Whenever you pay into your pension, you get tax relief from the government. How this tax relief manifests will depend on your tax banding and your pension scheme. Most employers operate a salary sacrifice arrangement, which provides you with income tax and NI relief at source, regardless of your tax-banding. However, if you pay privately into a pension, the tax treatment is slightly different. Basic rate tax relief (20%) is applied to the contribution, meaning higher and additional rate taxpayers, are still owed a further 20% and 25% tax relief respectively. This relief must be reclaimed by the individual separately via a self-assessment tax return.  

The pension annual allowance is currently £60,000. This allowance is inclusive of personal contributions, employer contributions and any government tax relief you receive. Contributions which exceed the Annual Allowance (AA) will be subject to a tax charge, known as an Annual Allowance charge, which is the removal/reclaim of any tax relief applied to the excess.  

However, it is important to note that if your income is less than £60,000 per annum, you are restricted to contributing up to a maximum of 100% of your relevant UK earnings (unfortunately, rental income and dividends don’t count).

Equally, if your ‘adjusted income’ exceeds £260,000 per annum, you may be subject to the Tapered Annual Allowance (TAA), which sees your annual allowance reduced by £2 for every £1 of adjusted income above £260,000. Therefore, for adjusted income £360,000 per annum or above, your annual allowance is reduced to £10,000 per annum. 

Can you carry forward unused annual pension allowance? 

In certain circumstances, you may be able to carry forward annual pension allowances from up to three previous tax years. In this instance, you are given permission to exceed your annual allowance and still receive tax relief. 

To benefit from carry forward, you must meet the following conditions: 

• You have been a member of a UK pension scheme (not including State Pension) in each of the years you wish to carry forward from. 
• You must have fully utilised your available Annual Allowance in the current tax year first 
• Unused Annual Allowance is then drawn from the furthest year first I.e. 2021/22 is the third year back from the current tax year. 
• You cannot contribute more than 100% of your relevant UK earnings in a given tax year. I.e. if your gross earnings are £70,000, this would be the total pension contribution you can make in the current tax year, regardless of whether your available carry forward allowances are higher. 

What is the Lump Sum Allowance and Lump Sum Death Benefit Allowance? 

The Lump Sum Allowance (LSA) refers to the maximum amount of tax-free cash that can be taken across all of your pension arrangements throughout your lifetime (including lump sums from defined benefit pensions). 
Whilst the previous Lifetime Allowance (LTA) was abolished as of 6th April 2024, it does still have some relevance.

The LSA is capped at £268,275, which is 25% of the old Lifetime Allowance (£1,073,100)

The Lump Sum Death Benefit Allowance (LSDBA) refers to the total amount of pension wealth that can pass tax-free by way of a ‘death benefit lump sum’ to your chosen beneficiaries on death before the age of 75.

The standard LSDBA uses the value of the former Lifetime Allowance - £1,073,100. However, if you hold transitional protection, protecting your Lifetime Allowance at a higher value, this remains the appropriate figure.

For example, if you hold Fixed Protection 2016, your LSDBA will remain at the higher protected amount of £1,250,000.

Should your total pension wealth exceed the ‘standard’ or ‘protected’ amount on death before age 75 and your pension is paid as a lump sum, your beneficiaries would be subject to income tax at their highest marginal rate on the excess.

If, however, your pension is passed to your beneficiaries as a pension, rather than a lump sum, the amount will not be tested and remains tax-free on death before age 75.

The rules remain the same on death post-75, in that any pension benefits passed as either a lump sum or as a pension will be subject to income tax at your beneficiaries highest marginal rate, either on payment (if received as a lump sum), or upon withdrawal (if received as a pension).

The Benefits of Pension Contributions

Pension contributions come with several valuable benefits that make them an attractive option for long-term savings:

• Tax Relief: Contributions are tax-efficient, with immediate relief for basic rate taxpayers and the ability to reclaim additional tax relief for higher and additional rate taxpayers (20% and 25% respectively).
• Employer Contributions: Some employers offer generous contributions above the statutory minimum (3%), effectively increasing your retirement savings at no extra cost.
• Investment Growth: Pensions are invested in markets and have the capacity to grow over time. Returns are compounded which can be enhanced by regular contributions. 
• Inheritance Benefits: Defined Contribution pension benefits sit outside your estate, meaning they are not subject to inheritance tax on death, resulting in a potential 40% tax saving. 
• Financial Security in Retirement: Maximising your pension contributions throughout your working life helps ensure you have sufficient income to meet your lifestyle requirements in retirement. For most people, the full State Pension (£221.20 per week) is unlikely to be sufficient alone to meet expenditure requirements. 

How much should I pay into my pension? 

How much you should pay into your pension will depend on a number of factors, including your age, earnings and financial goals. 

According to Fidelity International, a rough rule of thumb for determining your ideal pension contributions is to aim to save 10 times your pre-retirement income salary by the age of 67. So, if your average salary is £40,000, it’s recommended that you aim for a pension pot of around £400,000.  

Others say that you should aim to save 12.5% of your monthly salary. If your employer offers a more generous contribution than the statutory 3% then this figure can be reduced accordingly.  

Beyond these generalised points, however, there are a number of factors influencing the amount you should pay into your pension. Below are some of the most important: 

• What is your target income for retirement?   
• What age do you plan to retire? / What timeframe does this give you to save?
• What is your state of health/family history?  
• What level of income/expenditure are you expecting in retirement?  
• Do you have other assets/income that can support you in retirement?  
• Target income is often considered the amount you will need to maintain your current lifestyle. To get an idea of this, you can add up your current monthly expenses and deduct any that will no longer apply by the time you reach retirement (mortgage, commuting costs, etc.).
• Adding in any extra money you anticipate needing - This is for things like holidays, home renovations, or supporting family members, hobbies and interests.  
• Increases to inflation - The cost of living typically doubles every 25 years, so it’s worth incorporating this into any financial projections.  
• Length of retirement - This is a combination of the age you intend on retiring at and how long you expect to live. The latter is obviously a little less predictable, but you can find a good estimate by considering lifestyle factors and family history. 
• How much state pension you will receive - If you qualify for the full new state pension, you will receive £221.20 per week, or £11,502.40 a year for the tax year 2024/25. This is not likely to be enough to live on but could be a good top up tp your personal pension pot and other savings and investments. 

Despite the pension annual allowance of £60,000, if you’re getting close to retirement age, it may still be worthwhile making contributions in excess of this. Despite the annual allowance charge that would apply (ignoring any carry forward allowances), pensions offer additional tax benefits on death, sitting outside of your estate, so they can usually be passed onto your loved one's tax-efficiently.

It’s worth bearing in mind that pensions cannot be accessed before age 55 (57 from 2028), unless you are diagnosed with terminal illness. Therefore, it is important to maintain sufficient funds that can be easily accessed in the short and medium term to facilitate expenditure.  

Does my employer have to pay into my pension? 

By law, all employers must offer a workplace pension scheme. This means that three bodies contribute to your pension: you, your employer, and the government. 

If you qualify for automatic enrolment, then your employer is obliged to enrol you into a pension scheme and make contributions to your pension. If your employer is not obligated to enrol you by law, then you can still opt into their pension scheme — and your employer cannot stop you. 

However, they do not have to contribute if you earn an amount equal to or less than £520 a month, £120 a week or £480 over 4 weeks. 

Once you’re enrolled in your employer’s pension scheme, they must, by law, punctually pay at least the minimum contributions to the pension scheme, allow you to opt out of the pension scheme and refund you the money you’ve paid into it (if you do so within 1 month). Plus, they have to allow you to re-join the scheme at least once a year if you have previously opted out. 

Under no circumstances can your employer try to encourage or coerce you into opting out of the scheme, terminate your employment or discriminate against you if you decide to stay in a workplace pension scheme. Nor can they insinuate that somebody is more likely to get hired if they choose to opt out of the pension scheme or end a workplace pension scheme without automatically enrolling all members into another one. 

So in summary, there is no limit to how much you can pay into your pension. However, the limit for tax free contributions is £60,000 annually, which is known as the pension annual allowance, or 100% of relevant UK earnings (whichever is the lower figure). Exceed this, and you’ll be expected to pay an annual allowance charge. 

How can we help? 

Here at The Private Office, our experienced pension planning advisers can provide you with clear advice on your options for your pension, tailored to your unique circumstances and individual needs. Get in touch to arrange a free initial consultation.

Arrange a free initial consultation

This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.  

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

Investment returns are not guaranteed, and you may get back less than you originally invested.  

The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. 

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What does Rachel Reeves’ first budget have in store for your finances, and what action should you take now to protect against the possible changes?

When Keir Starmer stood in the garden of Downing Street on 27 August, he spoke of ‘Fixing the Foundations’ of the country and of a ‘£22 billion black hole in public finances’.  This has led commentators to conclude that if tax rises weren’t planned in Rachel Reeves’ first budget before, they certainly will be now.

When is the Autumn Budget?

The Autumn Budget will take place on 30th October 2024.

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What is likely to be in the Autumn Budget?

When Labour ran for election, they ruled out raising taxes on ‘working people’ and specifically pledged not to increase Income Tax, National Insurance, VAT or Corporation Tax.  This potentially limits the taxes they can look at (though we would expect Income Tax thresholds to remain frozen until 2028 as announced by the previous government) and we have summarised our views on these various taxes below:

Pensions

Though this would technically be a change to income tax, one possibility for the Government would be to reduce tax relief on pension contributions for high earners.  We already have the pensions’ ‘annual allowance’; which limits pension contributions for very high earners, but there is currently the opportunity for those paying higher rates of income tax, but with overall income below the threshold required to have a tapered ‘annual allowance’, to benefit from significant tax relief and the Government could look to limit this.

Another potential change to pensions is reviewing their beneficial tax treatment upon death, where they fall outside the individual’s estate for inheritance tax purposes and can be passed to future generations at attractive rates of tax.  Though taking action in the anticipation of potential future legislation changes would be inadvisable, if changes to pension death benefits are announced in the budget, financial plans will need to be reassessed.

Finally, the 25% tax free lump sum available from pensions has been talked about as an ‘at risk’ benefit for years, but it would certainly be viewed as unfair if this was targeted now, given that people have been saving towards retirement expecting to benefit from this.  Additionally, changes to the ‘Lump Sum Allowance’ have only just come into force in the current tax year and the Government has already said it will not be reintroducing the Pensions’ Lifetime Allowance, so they may be reluctant to tamper with this area further.

Capital Gains Tax (CGT)

With capital gains above the £3,000 annual exemption taxed at just 10% for basic rate tax payers and 20% for higher rate tax payers (higher rates apply for second property sales), there are rumours that the Government will review CGT rates. 

However, HMRC’s own projections indicate equalising capital gains tax and income tax rates could actually reduce the Government’s overall tax take, given this would discourage individuals from selling assets (and crystallising gains) so they may instead decide to retain them.

Additionally, it should be noted that cost prices for capital gains tax purposes are currently rebased on death (meaning gains essentially die with the individual) and if this was changed, financial plans would need to be revisited.

Inheritance Tax (IHT)

With the UK inheritance tax rate currently 40%, it is somewhat surprising that the tax only raises c. £7bn p.a. (of a total tax take of c. £1trillion in 23/24).  The reasons for this are the various reliefs available, including:

The ability to gift unlimited amounts to individuals with, broadly speaking, no tax consequences if the donor lives seven years following the gift).

The ability for couples to pass up to £1m between them tax free to direct descendants upon death.  

The Government could look to limit some of these reliefs and with £1 trillion of wealth expected to change hands in the UK in the 2020s alone, according to the Financial Times, the Government could see this as an area to focus on.

How will the Autumn Budget affect me?

We of course do not know what changes will be announced in the Autumn Budget on 30th October and, crucially, from when they take effect. 

So, what can you do to protect your wealth? 

This means there may or may not be time to take action following the budget, and while we would discourage taking action on the basis of rumours, there are actions that can be taken before the budget to take advantage of reliefs that are available now but could be at risk post 30 October.  

To speak to an Independent Financial Adviser about how the Autumn Budget might affect you and any actions you could consider ahead of the budget, please contact us for a free initial consultation.  

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The details in this article are for information only and do not constitute individual advice.

The Financial Conduct Authority (FCA) does not regulate estate planning, tax or trust advice.

The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.

The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a reliable indicator of future performance.

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available.  Your pension income could also be affected by the interest rates at the time you take your benefits.

A popular question often asked by clients is whether they should contribute into a pension or invest in a property portfolio to fund their retirement.

The reality is there are pros and cons for each investment vehicle, so it’s important to look at these along with how returns compare over the last 10 years. Here we break these down so you can better understand which option may be better suited for you. Although we would always recommend speaking to a financial expert before embarking on your decision.

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Pension

  Advantages

• Personal pension contributions attract income tax relief at your marginal rate. This means for basic-rate taxpayers, a £1 contribution essentially costs you 80p, as 20% tax relief is provided by the Government under the ‘relief at source method’. Your contributions can also help you reclaim certain tax allowances, such as the personal allowance, tax-free childcare, and child benefit entitlement. If you’re a higher rate taxpayer, you can claim an additional 20% or even 25% tax relief for an additional rate taxpayer. 
• Employer pension contributions are essentially ‘free money’ as your employer is providing this as an additional benefit in your remuneration package – often if you don’t take up the contributions, they won’t provide an alternative income instead. Business owners can reduce their Corporation Tax liability by making contributions into their own name.
• Any investment growth is free of Income Tax and Capital Gains Tax.
• Usually, 25% of the value can be withdrawn tax-free in retirement.
• Ability to invest in a diversified range of asset classes (cash, fixed interest, shares, property, and other instruments). Further diversification can be achieved by diversifying assets geographically.
• Flexibility to draw an income in retirement through various methods such as a Lifetime Annuity, Fixed-Term Annuity, and Flexi-Access Drawdown.
• If structured appropriately, any remaining funds after your death can sit outside of your estate for Inheritance Tax (IHT) purposes. This can be a tax-efficient way of passing wealth on between different generations.

 Disadvantages

• You are unable to access your pension funds until age 55. This will be increased to age 57 from 6 April 2028.
• The value of your pension is subject to investment risk.
• Depending on how much you spend and how long you live for, your pension pot could be exhausted during retirement if not managed appropriately.
• Legislation can be complex, and rules are often changed.
• On-going charges will apply (pension provider/platform, investment related charges and financial adviser fees).

Property

 Advantages  

• Potential for long-term capital appreciation and an opportunity of outperforming inflation over the long-term.
• Potential for a regular rental income stream. This can provide a consistent cashflow which can be reinvested into property or other assets.
• A diversifying asset as part of an overall investment portfolio, which means that it can provide a hedge against market volatility.
• Property improvements can add to the value and/or increase rental yields.
• Physical asset and you own something tangible.
• 20% tax-credit available on mortgage interest.

 Disadvantages  

• If capital is required, it can often be a lengthy process to release equity.
• High initial costs (legal fees and stamp duty etc). A surcharge of 3% on top of normal stamp duty rates applies on purchase of an additional property.
• Potential debt if you require a mortgage to fund the purchase.
• Property management. This can be a hassle, stressful, and time consuming. Paying a professional will eat into your rental yield.
• Maintenance – any repairs will need to be carried out swiftly and the costs are funded by you.
• Potential void periods. This can be a tricky situation to find yourself in if you have a buy-to-let mortgage.
• Tax credit on mortgage interest restricted to 20%, even if you are a higher-rate or additional-rate taxpayer.
• Capital Gains Tax will be applied on any profit when sold.
• Included as part of your estate for IHT if held until you pass.

Pension vs Property Performance  

A common issue UK property investors face is that the value of their portfolio is influenced by the UK economy and sentiment.

Investing through a pension can be a much simpler way to diversify globally and across different asset classes through a basket of funds. This can help smooth out governmental decisions or country specific issues, and benefit from growth in other economies. 

Past performance is not a reliable indicator of future performance.

Figure 1: Stock market performance VS Property - Source: FE Analytics, 2024.

The chart above demonstrates the stock market has outperformed UK property over a 10-year period.  

The MSCI World Index measures the performance of equity markets across developed countries and has returned 221.85% over this period. UK property returns range between 46.88% - 66.77%.  

However, it is important to note these property returns are based on capital appreciation only and do not include any rental incomes received. According to NatWest, as of 2024, the average annual UK rental yield is between 5% and 8% gross.

Should I invest in property or a pension?  

Both investment vehicles provide different advantages and disadvantages, as detailed above, and each have a place within a diversified portfolio. As each of our personal circumstances can vary widely, is important to seek advice. An independent financial planner will be able to help you establish which solution is most suitable for your own personal needs. If you’d like to speak to one of our expert advisers, why not get in touch for a free initial consultation, to see if we can help.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. 

The Financial Conduct Authority (FCA) does not regulate estate planning, tax advice or most types of buy-to-let mortgages. 

Your property may be repossessed if you do not keep up repayments on your mortgage.

Investment returns are not guaranteed, and you may get back less than you originally invested. 

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available.  Your pension income could also be affected by the interest rates at the time you take your benefits.

The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.

Approaching retirement can be a bittersweet thought. On the one hand there is excitement about never having to work again, and on the other, concern as to whether you’ve done enough to have a comfortable retirement. Many individuals suffer from anxiety over the decisions that need to be made relating to life after work, for example:

• "How much do I need to have a good quality of life and meet my expenditure needs?”
• “Is now the right time to retire?” 
• “Will my investment returns sustain my expenditure?”
• “How do I even access my pension?”
• “What happens to my pension when I die?
• “Do I have enough in my pensions and other savings?” 

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And the list goes on. In particular, workplace pensions that have been left to evolve over time with no proper management, may no longer meet the needs of the scheme member i.e. you. So, what are the key factors to consider before moving your pension to another provider, so you can ensure your pension can benefit you and your financial plans? Here's our top 5 considers before moving your pension.

Important Information: This article does not delve into the considerations for Defined Benefit (Final Salary) Pensions – transfers of these schemes are far more complex and require specific financial advice.

Retirement Benefits – How can I access my pension funds at retirement?

Understanding the type of pension you have will determine the options relating to how you can access your pension. Here are the main methods to access your pension for retirement:

Annuity 

Use your pension pot to buy an annuity, which provides a guaranteed income for life or a fixed term. This income can either be level or index-linked to keep up with inflation. 

Flexi-Access Drawdown (FAD) 

This allows you to take your benefits from your pension either a bit at a time or all in one go. This can be beneficial, for example, where you require different amounts from your pension at different times during your retirement, or where you expect your income tax band to change over the course of your retirement.

UFPLS (Uncrystallised Funds Pension Lump Sum)

This option allows you to take a lump sum whereby 25% will be tax-free and 75% will be taxable. Each scheme will have its own rules on if you can take multiple lump sums from your pension or only a single lump sum.

Unfortunately, not all pensions are equal, and therefore some of your pensions may have the full suite of options and some may have limited options, therefore it is important you understand what options are specifically available across each of your pensions. This could determine how you can draw an income in retirement. It’s also important to think about what options are suitable for you as a person, for example, if you are risk-averse and want a secure, fixed income for the rest of your life, annuities are a viable solution. However, if you are unsure how much income you will need in retirement and if you expect your spending requirements to change, one of the flexible options could be more beneficial, or the combination of the two.

Investment Choices – What funds can I invest into?

Pensions offer many different investment options and number of funds that you can invest in. Typically, Self-Invested Personal Pensions (SIPPs) offer the most diverse and wide-ranging fund selection (4,000+). Whereas large workplace pension providers may offer funds that are specific only available to the pension scheme and provider, restricting your choices of investment. You need to decide what your short- and long-term objectives are and whether your pension caters to your risk appetite with the funds available, as this will evolve over time.

Fees & Charges – Will the new pension be more expensive than my existing one?

Before moving your pension, you should always evaluate the costs associated with each scheme. Not all pensions operate the same charges; so, it would be prudent to look at the charges schedule for the new provider and scheme. Typical charges to check for include:

• Initial set-up fees
• Annual Management Charges (AMC) for the investments you might choose
• Platform fees for the service/ongoing administration involved 
• Charges for specific transactions – transfer penalties, early withdrawal fees, switching investment funds 
• Trading fees for the buying and selling of investments within fund

Death Benefits – Can my loved ones access my pension funds upon my death?

Leaving your pension behind after death is a very common occurrence, given that pensions remain outside of individuals estates for Inheritance Tax purposes. Therefore, you want the beneficiaries of your pension to be able to access your pension in an accessible and tax-efficient manner. The main ways to access pensions on death include: 

• Lump sum return of fund – This is the value of the pension on death which is paid as a lump sum to your nominated beneficiary.
• Beneficiary Drawdown – This allows you to pass on your pension to your beneficiary so that they have the option of drawing benefits from it as and when required. 
• Annuity – On death, the value of your pension can be used to purchase an annuity from your pension provider. This will provide a secure regular income for your beneficiary.

Pension Guarantees – What benefits could I lose on transfer?

Some pensions come with a guarantee, which can impact the amount of income you receive when you retire. These ‘safeguarded’ benefits might include a guaranteed annuity rate (GAR) or a promised minimum level of income (guaranteed minimum pension). These benefits are valuable in most cases so it’s important to take them into account when assessing your options, given that these guarantees are rarely retained when transferring to another provider. These can be very complex so it’s sensible to seek financial advice on these benefits.

Having the wrong pension scheme for your requirements can be detrimental to your overall retirement plans. Having a financial adviser can help you navigate through the quirks and nuances of pension schemes and help simplify the complexities, to ensure you are appropriately positioned for your long-term needs and objectives. If you would like to learn more about the suitability of your pensions and its suitability for your needs, why not get in touch and speak to one of our experts

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The details in this article are for information only and do not constitute individual advice.

The Financial Conduct Authority (FCA) does not regulate estate planning, tax or trust advice.

The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.

On the run up to retirement, many over 55s are opting to manage their finances without professional guidance, a decision that carries significant risks. According to research by Canada Life, a staggering 79% of individuals in this age group are navigating their retirement plans independently, without seeking financial advice. This DIY (Do-it-Yourself) approach contributes to nearly 29% of retirees finding their reality falling short of their dreams.

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Common pitfalls in planning for retirement: 

Many retirees are finding themselves unprepared for the financial realities of retirement. 

Factors contributing to this gap between their expectations and reality involve a failure to account for several critical aspects:

1. Health issues: The Canada Life study found that 36% of retirees reported experiencing unexpected health issues disrupted their retirement plans.
2. Inflation: About 21% of respondents did not factor in inflation, leading to a decline in purchasing power over time
3. Unforeseen expenses: Unexpected bills and expenses caught 13% of retirees off guard, indicating a shortfall in financial preparation.
4. Underestimating financial needs: A significant 11% of retirees underestimated the amount of money needed for a comfortable retirement.

This study underscores the critical importance of thorough and pragmatic financial planning before retirement. Tom Evans, Managing Director of Retirement at Canada Life, emphasises that through consulting a qualified financial adviser, retirees can address these factors proactively, ensuring more secure and fulfilling retirement.

Hurdles faced during retirement:

While understanding the pitfalls before retirement is essential, navigating the hurdles during retirement—such as managing your expenditure, income strategy, and adapting to legislative changes—requires ongoing attention.

Expenditure:

During retirement your needs will evolve, influenced by factors like inflation, healthcare costs, and lifestyle changes. The Pension and Lifetime Savings Association’s Retirement Living Standards study offers a helpful guide, showing that a couple aiming for a comfortable retirement might need an annual income of around £59,000, while a moderate lifestyle requires about £43,100 per year. Whilst this provides a good benchmark, your spending and goals are unique. As a result, it is essential to identify your specific expenditure needs and assess if they are sustainable throughout your retirement.

Income:

Strategising how to draw upon your assets to support your retirement is equally important. Ensuring that your assets work hard for you and that your funds are used in a tax-efficient manner is crucial. Retirees may have multiple income sources, across cash, pensions, ISAs, bonds and rental properties. Effective planning not only ensures tax efficiency but also can helps maintain or increase income potential during retirement. Seeking advice on how to take an income from your pensions and other assets is critical, as planning for the next two or three decades leaves little room for mistakes. 

Legislative Changes:

Recent and potential future changes to pension legislation, can profoundly affect retirement planning. Staying informed about these updates is crucial, however navigating these changes within the complex retirement planning landscape can be challenging. In these cases, working with an adviser can be hugely beneficial to provide guidance on how to adjust your plans to mitigate any negative impacts from legislative shifts and take advantage of any new opportunities that arise. 

A recent example of a significant change is the removal of the lifetime allowance. This legislation introduced two new allowances that affect the amount of tax-free lump sums or tax-free death benefits available from a pension. With the new Labour Government expected to release a budget this Autumn, it will be crucial to consider how these changes impact your retirement planning and to strategically respond accordingly.

A successful retirement plan isn't just about reaching a financial goal before you retire—it's about maintaining that security and adapting to changes throughout your retirement years. Regularly reviewing your expenditure, income strategies, and staying informed about legislative changes ensures that your plan remains robust and effective. 

Value of Advice:

Financial advice is of course not free so while many can see the benefits of receiving advice, the cost associated may be a driver behind why people are choosing to DIY (Do It Yourself) their plans. According to a report by the International Longevity Centre - ILC, individuals who receive professional financial advice are, on average over a decade, nearly £48,000 better off in pensions and financial assets than those who do not.  The study showed that the combined benefits of financial advice over a ten-year period are approximately 2,400% greater than the initial cost of the advice. This significant return on initial cost underscores the value of seeking professional guidance.

In summary, retirement involves many challenges, and the importance of robust financial planning cannot be overstated. Opting for professional guidance rather than navigating these waters alone could significantly improve your financial well-being during retirement and equip you with strategy to manage potential pitfalls effectively. Working with an adviser can ensure that as you transition away from work, you can feel confident in your future, providing you with peace of mind for a comfortable and fulfilling retirement.

If you’re thinking about your own future, we’re currently offering anyone with £100,000 or more in savings, pensions or investment a cash flow review worth £500. Why not get in a touch for a free initial consultation to see how we might help.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The Financial Conduct Authority (FCA) does not regulate cash flow planning, estate planning, tax or trust advice.

The value of your investments can go down as well as up, so you could get back less than you invested.

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available.  Your pension income could also be affected by the interest rates at the time you take your benefits.

The Pensions and Lifetime Savings Association, representing UK pension schemes, has called on the Government to increase the minimum contribution level after concerns around the number of people not prepared for retirement.

Currently the level is set to 8% of pensionable earnings, defined as a worker's basic salary excluding bonuses, commission, and overtime. Of this, employers are required to contribute at least 3%, while employees contribute 5%. It was proposed to increase this to 12% of total salary over the next decade, with employees and employers each contributing an equal share.

The annual retirement report, published this week by Scottish Widows, reveals that the percentage of people not on track for even a minimum retirement lifestyle has risen from 35% to 38% during the last year, equating to an extra 1.2 million people.

The Proposals

The proposal to raise the minimum contribution level from 8% to 12% with a 50/50 split is intended to enhance the retirement savings of over 15 million private sector employees. The proposals also include measures to help workers track their pensions when they change jobs, introduce value for money tests for pension schemes and include initiatives such as helping employees keep track of their pensions when they move jobs.

Industry professionals highlighted the urgency of increasing minimum contributions, which currently stand at 8% of pensionable salary, of which companies must pay at least 3% and employees 5%.

The Government announced that its pension bill measures could add an extra £11,000 to the pension pot of an average worker, although no supporting analysis was provided to explain how this figure was calculated. The bill includes an initiative to ensure schemes offer “value for money,” with underperforming funds being removed from the market.

The Government stated that these measures would “enable security in retirement” while allowing pension schemes to invest in a broader range of assets, which should, in turn, help to promote economic growth.

Currently, most people are left on their own to navigate the complex retirement income market. If you’re interested in how to manage your pension contributions to ensure the best possible wealth protection for you or your family, we can help. Give us a call on 0333 323 9065 or book a free non-committal initial consultation with a member of our team to find out more. 

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.