Pension savers urged to consider 3 options to ‘spread risk’ | Personal Finance | Finance
Pension savers have been told they may want to diversify where they put their cash as there could be major changes in the looming Autumn Budget. Experts at financial planning firm Capital for Life are warning Chancellor Rachel Reeves could set out some pension changes in her Autumn Statement.
Carlton Crabbe, finance and insurance expert with the firm, said: “Each Autumn Statement brings whispers of reform, but this year, the stakes are higher. With the UK facing an ageing population, rising life expectancy, and persistent fiscal pressures, pensions are an increasingly tempting target for tax policy changes.” Looking at some of the policies that could be change, Mr Crabbe said these could include cutting the higher rate tax relief on pension contributions, or changing the 25 per cent tax-free lump sum.
He said another “contentious” policy change, which is already on the cards, is making pensions liable for inheritance tax.
In last year’s Autumn Statement, the Chancellor announced plans for pensions to become liable for the 40 per cent tax. This change is due to come in from April 2027.
Mr Crabbe said: “Currently, pension assets often fall outside the IHT (inheritance tax) net, making them one of the most efficient vehicles for intergenerational wealth transfer. Changing that rule would significantly reshape estate planning strategies, prompting many to reconsider how and when to access or pass on their pensions.”
What should pension savers do ahead of any changes in the Autumn Budget?
Given the uncertainty around what could change, the expert said there are some key lessons to take when it comes to your pension planning. One of his tips is to diversify your retirement income where you can.
Mr Crabbe said: “Don’t rely solely on pensions; consider ISAs, investment bonds, or protection plans to spread your risk.” ISAs are a tax-efficient way to build up your savings, as any investment growth or interest earnings within an ISA are tax-free.
You can deposit up to £20,000 into ISAs each tax year and retain the tax-free status. The expert also encouraged people to be proactive and not reactive.
He explained: “Policy changes happen fast. Regularly review your pension strategy with a financial adviser to identify tax-efficient opportunities.”
It’s also important to make sure you understand how your retirement finances are structured, including where you pensions are invested, how these investments are performing, and what fees you are paying.
Mr Crabbe also encouraged people to arrange their savings so they can be flexible. He said: “If the triple lock or tax-free lump sum is altered, having alternative income sources can cushion the blow.”
The pension expert also said: “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.”
