The Chancellor Rachel Reeves has confirmed that the Labour Government’s first Budget will be on October 30.
The announcement came as Reeves scaled back or ditched a number of spending commitments made by the previous Conservative government, to help plug a “£22bn black hole” in the public finances.
These plans announced today include axing the cap on social care charges as well as making changes to winter fuel payment. Other changes include dropping various rail and road projects, including the planed tunnel under Stonehenge and abandoning the NatWest share sale to retail investors.
Reeves said she would stand by the manifesto promise not to hike specific taxes but her statement in Parliament today, is unlikely to dampen speculation that other taxes could be raised in the forthcoming Budget.
A number of pension analysts, including Hymans Roberston, have already published analysis showing how much money the government could raise by making changes to pension tax relief. There may be scope for this as the government has already committed to a large scale pension review with the twin aims of boosting investment into the UK and improving retirement adequacy.
Hargreaves Lansdown head of retirement analysis Helen Morrissey says: “Rumours are already swirling that the Chancellor could turn to pensions as she seeks to fill the black hole in the nation’s finances.
“Introducing flat rate tax relief is one such story, as well as predictions that she could look to trim back tax-free cash. Making pensions liable for inheritance tax is another way she could look to raise money, as this tax treatment looks generous when compared to other wrappers such as Isas.
“Whether such changes will come to pass remains subject to debate but any changes to pension tax need to be part of a wider ranging review. Years of tinkering around the edges has resulted in a complicated system that can undermine people’s confidence in pensions. An overarching review should look at how the system can be made simpler for people to navigate and help them to plan for the future without fear of major changes to how their savings will be treated.”
Aegon pensions director Steven Cameron adds: “The announcement that the government will not be taking forward the previous government’s deal on social care funding will be a bitter blow to those facing unlimited bills for adult social care. Social care funding is a major concern to millions of families but had been noticeably absent from the Government’s election manifesto and the King’s Speech.
“Cancelling the deal, which was to have started in October 2025, means individuals will no longer have their contributions towards eligible care costs capped at £86,000. Instead, as currently, those requiring care for longer periods face catastrophic care costs which can wipe out a lifetime of savings.
“Had the new funding deal been introduced, individuals would have been able to plan for the eventuality of needing to pay for care. But unfortunately, as now, those who’ve done the right thing and saved for their later life could see it all – and their family home – disappear to pay for care, destroying plans to leave an inheritance to loved ones.
“With people on average living longer, the challenge of social care funding is likely to get worse. While the nation’s finances may be stretched, we do hope the government will look again at what can be done to strike a fair funding deal between individuals and the state.”