Millions of pensioners across Britain face potential financial upheaval as Chancellor Rachel Reeves prepares to unveil significant pension reforms in Wednesday's Autumn Budget.
The Labour government's second budget, scheduled for November 26, is expected to introduce several key changes to pension arrangements that could dramatically affect retirement savings for workers and pensioners alike.
Salary Sacrifice Schemes Under Threat
One of the most significant proposed changes involves capping salary sacrifice pension arrangements. The Chancellor plans to establish a £2,000 annual limit for these schemes, with National Insurance contributions becoming payable on amounts exceeding this threshold.
Under the new system, contributions above £2,000 annually would attract National Insurance at standard rates - eight percent for earnings below £50,270 and two percent for income above that level.
This proposal has drawn strong criticism from industry groups. Pensions UK and the Federation of Small Businesses have sent a joint letter to the Chancellor urging her to reconsider.
The letter states: "Limiting salary sacrifice will hit working people trying to save for a better pension in retirement – including those on lower-than-average earnings for whom every penny counts both in working life and at retirement."
Potential Changes to Tax-Free Lump Sums
Another area of concern for pension holders involves potential alterations to tax-free lump sum withdrawals. Reports had suggested the government was considering reducing the amount that can be withdrawn from pensions without tax liability.
Currently, individuals aged 55 and above can access 25% of their pension tax-free, up to a maximum of £268,275. There were fears this could be reduced to just £100,000, though recent indications suggest the Treasury may have abandoned these plans.
State Pension Increase Confirmation
One piece of positive news for pensioners would be confirmation of the state pension increase for April 2026. If the government maintains its commitment to the triple lock mechanism, payments are expected to rise by 4.8 percent.
This would increase the full new state pension from £230.25 to £241.30 per week, while the old basic state pension would rise from £176.45 to £184.90 weekly.
The Autumn Budget represents a crucial moment for retirement planning in the UK, with millions watching closely to see how these potential changes might affect their financial futures.
