The UK’s ageing population is facing rising retirement costs, leaving many people – particularly women and lower-paid self-employed workers – struggling to maintain a comfortable lifestyle in retirement. The newly revived Pensions Commission is expected to review how to strengthen pension savings, including widening auto-enrolment and increasing minimum contribution levels, building on the scheme first introduced 13 years ago.
With household budgets stretched, it can be difficult to prioritise long-term savings. Changes to auto-enrolment could help by diverting more income into pension funds automatically, reducing the pressure on individuals to make tough financial decisions.
The Autumn Budget may also bring changes to inheritance tax (IHT), which has already seen receipts rise by more than 250% in the past 15 years. While the government argues that IHT reduces the need for a separate wealth tax, there may be further reforms to areas such as the lifetime gifting regime, which currently allows unlimited payments from income outside of the tax net if they are surplus to living expenses.
Taxpayers looking to reduce their liabilities might also consider salary sacrifice. With frozen tax thresholds pushing more earners into higher tax brackets, salary sacrifice enables individuals to redirect part of their salary into a pension, lowering taxable income and boosting retirement savings. However, it’s not suitable for everyone, as sacrificed salary cannot be used for mortgage affordability assessments and cannot be accessed until pension age.
For more insights on pensions, inheritance tax and salary sacrifice, read our autumn financial planning newsletter below. We’ll also provide updates in December following the Chancellor’s Budget announcements.
