The new Labour government, led by Keir Starmer, came into power in July. Since then, they have been busy taking stock of the UK’s financial and economic state, amongst other things. Many policy and fiscal changes will be announced in the Autumn Statement on October 30th. However some have already been announced. We’ll discuss these policies, and also summarise potential upcoming changes in the Autumn Statement.
Winter Fuel Payments for Pensioners
What has happened previously?
Winter Fuel Payments were first introduced in 1997. Their purpose was to support vulnerable pensioners through the winter months, by easing the burden of increased heating bills. The payment is made as a tax-free lump sum of £200 or £300, normally in November or December.
What have Labour announced?
Early in September, Chancellor Rachel Reeves announced the Winter Fuel Payment will be means-tested. The change is due to take place as of this year. Pensioners who receive Pension Credit will still be eligible for the Winter Fuel Payment. Other means-tested benefits may also make you eligible. The government have said they’re aiming to target assistance for the most vulnerable. They are also campaigning to ensure all those eligible for Pension Credit are claiming it. They hope to register all eligible pensioners in time for them to receive the Winter Fuel Payment. It is expected that up to 800,000 pensioners could be eligible for Pension Credit, but do not currently claim it.
What has happened since the announcement?
There has been some anger and frustration about this announcement, from those in Parliament, and the public. Opposing MPs tabled a motion to block the change. This motion was heard on 10th of September 2024 in Parliament, however it failed to receive the required support, losing 348 to 228. There is frustration that Labour made no mention of this policy change during their election campaign. The government have countered that they did not want or expect to make such changes, but they have had to make difficult decisions due to the state of the UK’s finances.
Starmer has admitted that there had been no long-term impact analysis carried out. He asserted, however, that the decision to maintain the Pension Triple Lock lessens the impact on pensioners. However, the winter fuel payment is a single lump sum made at a time when it is most needed, whereas any increase to the State Pension would not take effect until the following April, and would be paid as a small monthly increase instead of a lump. Moreover, the purpose of the State Pension Triple Lock is to help with the increased cost of living, not replace the winter fuel payment.
Age UK Director Caroline Abrahams CBE, has spoken of her disappointment that the payment will be scrapped. Age UK believe it is unfair “to remove the payment from the 2.5 million pensioners on low incomes who badly need it, and to do it so quickly this winter, at the same time as energy bills are rising by 10%.”
State Pension Triple Lock
What is the State Pension Triple Lock?
The State Pension Triple Lock was first introduced in 2010. Its primary purpose was to ensure the State Pension is protected from inflation. The Triple Lock states that the State Pension will rise each April, by the highest of the highest of the following three factors:
- The level of inflation the previous September – as measured by the consumer price index (CPI)
- The average increase in earnings the previous July – as measured by the average Earrings Index (AEI)
- Flat 2.5%
What have Labour announced?
Labour has promised that the Pension Triple Lock will remain in place for now. Whilst they haven’t committed to it remaining in the long-term, there will be an increase in State Pension of 4% from April 2025. This is following the Office of National Statistics announcement earlier in September about the growth in average earnings by 4%. In monetary terms this increase in State Pension will equate to £460 across the year. This increase is applicable to those on the new State Pension. The basic State Pension also has Triple Lock Protection, but the rise will be smaller.
The increase of £460 is Starmer’s reasoning for asserting that it will more than make up for the payment deficit for most pensioners. The Winter Fuel Payment could be up to £300, so the increase in State Pension is greater than this. However as detailed earlier, the State Pension increase will be paid in instalments across the year. This leaves many pensioners at an income deficit over the winter months, with no increase until April 2025.
Announcements expected in October’s Autumn Statement
Prime Minister Keir Starmer has acknowledged and forewarned that the Autumn budget will be “painful”. Whilst the announcements will not be made until October 30th, analysts have begun speculating about potential announcements. The government have reiterated that they will not increase National Insurance, income tax, corporation tax or VAT. There are still many revenue streams, however, that the government could choose to make changes to.
It is deemed likely that changes will be made to Capital Gains Tax and Stamp Duty Land Tax. There are expectations of a pensions taxation reform, too. This could mean that the amount you are able to withdraw from your pension tax-free is reduced from the current level of 25%, or that pensions will start to fall inside your estate for inheritance tax purposes.
The Conservatives abolished the Pension Lifetime Allowance (LTA) during their Spring Budget in 2023. This had previously meant that you could save up to £1,073,100 into your pension before facing any tax penalties. Labour had originally asserted that they would reverse this, but have since made a U-turn on this decision. It is now deemed unlikely the LTA will be brought back during the Autumn Statement.
So what next?
What the announcements and speculation show is that it is more important than ever to begin planning for your retirement. Reacting quickly to any potential policy changes is essential and in this uncertain political time, seeking financial advice has never been more important. It’s also a reminder that there is a considerable risk to relying solely on government financial support in retirement. Planning ahead and building a private pension pot, or investing in ISAs, will make you less vulnerable to policy changes.
Here at Willday Wealth Management, we’ll continue to bring you news of any government announcements that will impact your retirement. Watch this space for more about the Autumn Statement as we break down what the announcements will mean for you. We will be releasing a podcast discussing the outcome of the budget and how this could impact you so watch this space for further policy breakdown.
