Significant modifiications in pension plans, set to take effect in 2025
The past year saw retirement planning take center stage, with pensions becoming a hot topic in the run-up to the general election and the Autumn Budget. The previous Conservative government had promised a "triple lock plus," while the Labour government slashed the Winter Fuel Payment shortly after winning the election, causing a surge in Pension Credit applications.
Curious about what 2025 holds for pensions? Experts predict significant shifts in the coming year, especially after the appointment of new pensions minister, Torsten Bell.
Let's dive into some key issues and trends:
- State pension increase: Pensioners can look forward to a 4.1% rise in their state pension in April 2025 due to the triple lock. This means someone receiving the full new state pension will get £230.25 a week, amounting to around £12,000 a year. However, retirees will need to keep an eye on the income tax bill resulting from this increase.
- Deadline for NI credits and state pension top-up: The end of the 2024-25 tax year marks the deadline to boost your state pension by claiming for National Insurance (NI) credits back to 2006, with the government allowing people to claim further to April 2018 due to demand.
- Pensions dashboards edge closer: The long-awaited pensions dashboard project is finally set to launch, allowing savers to access their pensions information online securely. The largest pension providers must connect by April 2025, with smaller providers following by September 2026.
- Launch of defined contribution (DC) megafunds: New pension "megafunds" are expected to disrupt the defined contribution (DC) market, with the Pension Schemes Bill set to debut in 2025. These funds aim to consolidate DC pension schemes and pool assets from local government pension scheme authorities for investment in UK infrastructure and private equity.
- More detail about IHT on pensions: We'll hear more about how applying inheritance tax to pension pots will work in practice, with the government running a technical consultation that finishes today (22 January).
- More help with pension decisions: The Financial Conduct Authority (FCA) is considering how to support millions of people making decisions about their pensions in retirement, with a consultation running until 13 February.
- The Waspi debate continues: The government's announcement of no compensation for Waspi women was met with disappointment, but the fight for change continues in 2025.
- Faster pension transfers: Regulators are looking at ways to make pension transfers quicker and easier, with potential delays and "sludge" practices from certain pension providers causing concerns.
- Watch out for pension scams: With an increased use of digital tools and customer data comes increased risk of cyber threats and scams. Consumers need to be careful against sophisticated tactics that could trick them out of their pensions savings.
Hopefully, we won't see the rise of "finfluencers" giving dodgy financial advice on social media platforms anymore, as the FCA begins to crack down on such practices. Stay tuned for updates on these key trends and issues affecting your retirement planning in 2025!
- As the pensions minister, Torsten Bell's appointment in 2025 is anticipated, people should keep an eye on how this shift might impact their personal-finance plans, particularly regarding the proposed changes to property ownership for retirees using their savings.
- In personal-finance matters, understanding the finer details about the application of inheritance tax (IHT) on pensions will be crucial in the coming year as the government plans to release more information on the practical aspects of this policy.
- With the launch of defined contribution (DC) megafunds in 2025 expected, individuals should investigate their personal-finance options and consider if these funds might offer better finance prospects for their retirement savings and investments in properties or other ventures.
