Aside from the change announced about bringing unused pension pots into Inheritance Tax (IHT) from April 2027, other announcements relating to pensions were thin on the ground during the Budget speech.
The Chancellor confirmed that the State Pension will increase in line with average earnings, rising by 4.1% in April 2025. This means the full, new flat rate State Pension (for those who reached State Pension age after April 2016) is expected to rise to £230.25 a week. The full, old basic State Pension, for those who reached State Pension age before April 2016, is anticipated to rise to £176.45 each week.
A reminder about current pension allowances and thresholds:
A significant shift
The end of the IHT exemption for pension pots will prompt some rethinking of retirees’ decumulation strategies as people focus on using their pension for retirement income rather than estate planning purposes. The Chancellor expects 8% of estates will be impacted annually. It really is a significant shift worth planning for.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. The Financial Conduct Authority (FCA) does not regulate tax and estate planning.
Information within this article is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed.