It was once again time for high earners to bear the brunt of another Budget aimed at balancing the books by biting into pensions.
Successive Budgets have seen pensions as a go-to spot for additional funds, but the cumulative legacy of these decisions is beginning to leave scars.
It is time to look at the long-term impact of pension raids and determine whether the current working generation is facing the prospect of a reduced retirement income.
Are successive Budgets shrinking pensions?
The removal of the Lifetime Allowance (LTA) was a positive change for the pensions of high earners, but other measures have been less favourable.
The previous Autumn Budget saw unspent pension pots fall under the scope for Inheritance Tax (IHT) for the first time.
This resulted in an outcry from high earners, many of whom had been using salary sacrifice schemes to enhance their pension pots.
The solution from the Chancellor seems to be to remove the mechanism by which a person would grow their pension.
The 2025 Autumn Budget imposed a cap on salary sacrifice of £2,000 a year, after which payments will be liable for both employer and employee National Insurance contributions (NICs).
Due to come into effect from April 2029, this will dramatically reduce the viability of salary sacrifice and will undoubtedly result in smaller pensions for people who are working now.
What does the future hold for pensions?
Measures to reduce pension saving might seem like an effective way of raising money in the short term, but the long-term impact could be troubling.
If pensions are not allowed to grow, the current working generation will struggle to support themselves in retirement.
If this is also compounded by more wages being subject to tax, younger generations may forgo pension savings entirely, only to be met with difficult decisions in their later years.
We can only hope that future Budgets are kinder to pensions, if only for the fact that there may soon not be enough of them left to raid.
In the meantime, we can help you find an efficient way to save for the future.
Speak to our team today to find out how to make your pension work for you.
