With the Autumn Budget approaching, financial experts are urging British pension savers to urgently review their retirement arrangements. Chancellor Rachel Reeves is expected to announce potential changes to pension rules on November 26, making this a critical moment for retirement planning.
Why Higher Rate Taxpayers Need to Act Now
Rajan Lakhani, a personal finance specialist at Plum, has issued important guidance for those with personal pensions. If you're a higher-rate or additional-rate taxpayer, you should consider maximising your pension contributions while current rules remain in place.
"You receive tax relief on what you pay in, and for some people, you might avoid moving into a higher tax threshold," Mr Lakhani explained. "With the Chancellor expected to freeze tax bands again, that will be even more important."
Understanding Pension Tax Relief Claims
The current system automatically adds 20% basic tax relief to personal pension contributions. This means every £80 paid into your pension becomes £100 with tax relief added.
However, higher and additional rate taxpayers don't receive their full tax relief automatically. They must claim back the extra through self-assessment forms with HMRC, otherwise they risk missing out on significant savings.
Tax-Free Lump Sum Rules Remain Secure
In reassuring news for savers, Helen Morrissey of Hargreaves Lansdown confirmed that restrictions to tax-free cash are "firmly off the table" for now.
Currently, from age 55 (rising to 57 from April 2028), you can typically take up to 25% of your pension as a tax-free lump sum, up to a maximum of £268,275. This valuable benefit will remain protected according to recent reports.
Ms Morrissey noted this decision "will be greeted with a huge sigh of relief from people who have worked hard to build up a decent retirement income and were concerned about the looming loss of a valuable benefit."
