So far 2025 has been a particularly busy year, with many Government and regulatory initiatives moving forward, from the Pension Schemes Bill and targeted support to developments around Pensions and Inheritance Tax. But the year’s far from over. In this article, I’ll highlight key considerations for advisers to look-out for as we move into the final stretch of the year including:
- Autumn Budget
- Pensions and Inheritance Tax
- Pension Schemes Bill
- Consultations arising from the Bill
- FCA Policy Statement on targeted support
- The FCA and transfer journeys
- State pension triple lock
What will happen in the Autumn Budget
On 26th November, Rachel Reeves will deliver her second Budget. And after last year’s hike in employer National Insurance and bringing unused pensions on death into scope of inheritance tax, most of us are wondering what the Chancellor might have up her sleeve for our industry this time round.
While still some way off, that hasn’t stopped speculation. The Treasury has said the Budget will be about ‘delivering for working people, by prioritising renewal and growth through investment and reform’. So, can we be sure the Chancellor will stick to Labour’s Manifesto commitment not to increase income tax rates, National Insurance (well, employee NI!) and VAT? What options does that leave to balance the books without breaking her ‘non-negotiable’ fiscal rules?
I believe, one of the more likely announcements is a further freeze on income tax thresholds. But that’s likely to mean come 2027/28, pensioners whose sole income is from the full new state pension will face a tax bill unless there’s some form of concession.
Changes to pensions tax relief remain a perennial threat making it a key area for advisers to monitor. Chancellors of whichever party is in power often see this as appealing. That’s until their teams detail the many associated complexities, not least the havoc this would play with public sector defined benefit pensions.
Further cuts in tax free cash lump sums have also been suggested, but unless there were transitional protections, I predict howls of protest from public and private sector workers alike about a retrospective cut in their expected benefits. There’s also the potential for some recreated form of lifetime allowance – yes, I feel your pain.
Other possibilities outside pensions rules include finding a way to recoup some of the income tax and NI the Government misses out on through salary sacrifice. Could we see further changes to capital gains tax, inheritance tax or even a mansion tax?
Clarifications on Pensions and Inheritance Tax
Earlier this summer, HMRC published a policy paper on how unused pension funds or death benefits will be included within estates for inheritance tax purposes. This included some welcome changes, but the industry is still seeking some clarifications which may emerge by the year-end. It’s clear inheritance tax planning should be a major focus for advisers in the run up to April 2027 and beyond.
The Pension Schemes Bill progressing through parliament
Casting our minds back to spring, we saw the publication of the blockbuster Pension Schemes Bill which covered a lot of ground but with little depth. Provisions included megafunds for multi-employer workplace pension schemes, a value for money framework for default arrangements, automatic consolidation of small DC pension pots of £1000 or less, and new ‘default pension benefit solutions’ for workplace scheme members who don’t engage with their retirement choices. All could have knock-on consequences for advisers.
As the Bill goes through various parliamentary stages, at Aegon we’ll be keeping a close eye on any amendments agreed along the way. It’s important the Bill doesn’t close off options which might emerge from future consultations. At the same time, it mustn’t leave too much freedom for regulators, ministers, or new Governments to make future changes without due process and consultation.
Consultations arising from the Bill
One Bill-related consultation I expect later this year from the FCA is on the Value for Money framework. Despite two previous consultations, there’s little consensus, so we could see some significant changes before arriving at a meaningful framework. The key will be enabling fair comparisons across DC pension schemes on investment performance, costs and charges and quality of services. Let’s hope we see a reduction in data points – otherwise there’s a risk of losing sight of the wood for the trees.
I also expect a consultation on the definition of default arrangements and on which assets from which scheme types will count towards the £25bn scale needed by 2030.
A critical enabler to allow contract-based funds and schemes to consolidate will be ‘contractual override’ without individual member consent. The FCA is expected to consult on this later this year, covering the overall process including independent assessment to safeguard members’ best interests. Advisers will want to understand how providers plan to use this to benefit members.
FCA policy statement on targeted support
After its latest targeted support consultation, the FCA is aiming for a policy statement by the year-end. The authorisation gateway to apply for permissions will open in March, with targeted support potentially up-and-running for the next tax year. I hope this is widely offered, complimenting and not cannibalising advice.
The last consultation paper wasn’t just tidying up loose ends, it included 64 questions, and I’m keen to see where things land in a range of areas including:
- The authorisation process – how onerous will it be?
- Regulatory minimum capital – hopefully, this will be slashed from the current £500k proposal
- Privacy and Electronic Communications Regulations (PECR) – while outside the FCA’s remit, change is needed or targeted support will be limited in who it can reach
- FOS – more clarity on how complaints around targeted support will be judged
The FCA and transfer journeys
The FCA has also indicated it will be consulting on pension transfer journeys later this year. DC pension transfers and consolidation featured in a Discussion Paper last December which explored if non-advised consumers understand the impact transfers have, for example on costs, as well as if transfers are operationally efficient. Since then, the FCA reported favourably on transfer times. But it also decided to exclude consolidation from the initial scope of targeted support. As we look ahead, the breadth of the upcoming CP and the nature of its proposals will be critical to watch.
State pension triple lock outcome
Mark your calendars for mid-October, when we’re likely to see the outcome of the state pension triple lock. It’s going to be a close call between the higher of earnings growth (year on year increase for the May to July period, published 16 September) and September’s CPI, published 15 October.
Here to help you navigate what's next
I did say it was a busy year, and it’s showing no signs of slowing down. At Aegon we’ll be on the lookout for all developments affecting advisers and their clients. There’s a lot happening and if anything, the pace of change will keep increasing. Keep checking back for updates and more detailed analysis on specific topics to support you with delivering informed client advice.
Advisers continue to play a vital role in this changing world.