What the Autumn Budget 2025 Means for Your Pension

The Chancellor's Autumn Budget brought several changes that will affect how we save for retirement. Let me break down what actually matters for your pension.

The Headlines

Inheritance Tax on Pensions (From April 2027)

The big one. Currently, pension pots can be passed to beneficiaries largely tax-free. From April 2027:

• Pensions will be included in your estate for inheritance tax
• This could mean 40% tax on pension pots above the IHT threshold
• The change affects both defined contribution and unused defined benefit pensions

What this means for you: If you were planning to leave your pension untouched as an inheritance, you may need to rethink. Drawing from your pension and gifting during your lifetime might become more tax-efficient.

The Tax-Free Lump Sum

Good news here: the 25% tax-free lump sum remains unchanged. You can still take up to £268,275 (or 25% of your pot if lower) tax-free.

State Pension Triple Lock

The triple lock continues for now:

• State Pension will rise by 4.1% from April 2025
• New full State Pension will be approximately £11,975/year
• That's about £230 per week

What Should You Do?

If You're Close to Retirement (Within 5 Years)

1. Review your drawdown strategy - The IHT changes might affect your plans
2. Consider your tax-free lump sum - Still available and valuable
3. Check your State Pension forecast - Ensure you'll get the full amount

If You're Mid-Career (15-30 Years to Go)

1. Keep contributing - Pensions remain one of the most tax-efficient ways to save
2. Maximise employer matching - This is still free money
3. Review your fund choices - Are you in the right investments for your timeline?

If You're Just Starting Out

1. Don't be put off - Pensions are still excellent vehicles
2. Compound growth beats future tax - Starting early matters most
3. Get enrolled - Auto-enrolment is the minimum, not the target

The Numbers That Matter

Tax Relief Still Works

For every £80 you contribute:

• Basic rate taxpayer: Government adds £20 (you get £100)
• Higher rate taxpayer: Claim additional £20 back (costs you £60)
• Additional rate taxpayer: Claim £25 back (costs you £55)

That's still a brilliant deal.

Annual Allowance

You can contribute up to £60,000 per year (or your annual earnings, whichever is lower) and receive tax relief. This hasn't changed.

Lifetime Allowance

This was abolished in 2024 and hasn't returned. There's no cap on how much you can have in pensions, though you'll pay income tax on withdrawals above the old LTA level.

Common Questions

"Should I Take My 25% Now Before Rules Change?"

Not necessarily. The tax-free lump sum rules haven't changed. Only take it if you have a specific use for the money or it fits your overall plan.

"Should I Move My Pension Abroad?"

This is getting more attention, but it's complex and expensive. For most people, the costs and risks outweigh the potential benefits. Get proper advice before considering this.

"Is My Final Salary Pension Affected?"

The IHT changes will affect any unused defined benefit pension, yes. However, most DB pensions pay out over your lifetime anyway, so the impact is often limited.

My Advice

Don't panic. Don't make rushed decisions.

The fundamental truth hasn't changed: pensions are still one of the best ways to save for retirement. The tax relief on contributions is incredibly valuable, and these changes primarily affect wealth transfer, not your retirement income.

If you're concerned about how these changes affect your specific situation, book a review. The right advice now could save you significant money later.

Want to understand your pension better? Our free pension tools can help you see exactly where you stand.