From rules around how much of your pension you can take tax-free, to changes to salary sacrifice schemes, we round up all the speculation and reveal what it could mean for you
The Chancellor will deliver her Autumn Budget on November 26 and there are plenty of rumours swirling about what it could mean for your pension.
From rules around how much of your pension you can take tax-free, to changes to salary sacrifice schemes, we round up all the speculation and reveal what it could mean for you.
Of course, this is naturally all just rumours at this stage and we won’t know for sure what measures may, or may not, end up being announced until Rachel Reeves makes her Budget speech in the House of Commons.
Tax-free lump sum
There had been speculation that the Chancellor was considering cutting the amount you can withdraw from your pension without having to pay tax. Once you reach the age of 55, you can access 25% of your pension tax-free, up to a maximum of £268, 275.
It was initially claimed that the Chancellor was considering lowering this to £100,000 – however, the Telegraph reported in the last week that the Treasury has now ditched these plans.
It follows reports of retirees racing to withdraw pension early in anticipation of a potential change in tax rules.
Salary sacrifice cap
Ms Reeves is instead reported to be looking at introducing a new £2,000 yearly cap on how much money can save into your pension through salary sacrifice schemes.
Salary sacrifice allows you to give up some of your salary for a non-cash benefit, such as pension contributions. As this exchange happens before tax and National Insurance are calculated, both the employee and employer typically save on National Insurance.
There is currently no cap on how much you can save into your pension through salary sacrifice, although there is an overall annual allowance of £60,000 for how much you can pay into your retirement pot before you pay tax.
Analysts have warned that capping salary sacrifice pensions runs the risk of savers having less in their pots when they retire, or some workplaces closing their schemes altogether.
State pension increase
The Chancellor is expected to confirm how much the state pension will by next April. If it goes up in line with the triple lock, then the state pension will rise by 4.8%.
Under the triple lock guarantee, the state pension increases every April in line with whichever is the highest of earnings growth in between May to July, inflation in September, or 2.5%.
Wage growth for May to July was confirmed to be 4.8% and inflation is 3.8% – so wage growth should be the measure used to increase the state pension.
This means the full new state pension should increase from £230.25 to £241.30 a week in April 2026. The old basic state pension should increase from £176.45 to £184.90 a week.