The period before the Budget can be awash with rumours about our personal finances. And we’ve seen these rumours drive real world behaviours before. In the 2024/25 tax year, tax free cash withdrawals soared to £18.3bn.
But it’s really important not to let short term speculation undermine a plan that you have taken years to build.
This article is for information only and not personal financial advice. If you’re not sure what’s right for you, a financial adviser can help.
Don’t let budget rumours derail your pension plan
Pensions have always been a fertile ground for these whispers. In recent years we’ve seen changes to tax-free cash as well as tax relief all put forward as possible areas for reform. It can be unnerving but concentrating on your long-term plan is the right thing to do.
One recurring rumour is that the government may make changes to tax relief. While the potential restriction of such an important incentive is worrying, it’s worth remembering that while we cannot predict the future, these are just rumours. It’s always best to work within the framework that exists now – in this case tax relief is available at your marginal rate so it’s best to carry on contributing as normal.
Should you increase pension contributions before the budget?
If you’re in a position where you have some extra cash and you were planning on adding money to your pension, then it could be a great time to turbocharge the contribution and make the most of any available tax relief. You can usually access money in a pension from age 55 (rising to 57 in 2028) and any tax benefits depend on your personal circumstances.
As it currently stands you can usually contribute up to your annual wages or £60,000 per year to your pension – whichever is lowest. This includes personal contributions, employer contributions and tax relief – aka your annual allowance.
You also have the option to use any unused annual allowances from the previous three tax years, provided you earn at least that amount. This is known as carry forward and can make an enormous difference to your pension.
This could prove a no-regrets move as you’ve made the most of your pension contribution regardless of what the Budget may bring.
Focus on long-term pension planning, not short-term speculation
Pensions are the ultimate long-term investment, and people need a secure and certain framework in which to operate. Building a pension takes years of discipline and this must not be undermined by short-term Budget speculation.
Our advisers can help you with planning for the Budget. Understand how inheritance tax on pensions and changes to tax relief could impact you.
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