Waiting to find out what is actually in the coming Budget before you make any big decisions about your finances is a perfectly respectable choice.
But if you decide it is wiser to pre-empt any unwelcome news, it’s better to err on the side of doing things that make good financial sense whatever is announced on 26 November.
Most concern is focused on changes to pension tax-free cash, but bear in mind that if you withdraw this money unnecessarily you could be damaging your prospects of future investment growth based only on speculation.
Fears of a raid were not realised last year, and tax-free pension withdrawals will be irreversible should nothing happen again this time.
Former Pensions Minister Steve Webb reckons the Government will not dare to wreck people’s retirement plans by cutting the limit, let alone abolishing tax-free cash – and if it does defy warnings then transitional protections will be put in place.
So what sensible steps might you take before the Budget that are unlikely to backfire.
Pre-empting the Budget: Doing nothing is a respectable choice but there are some sensible steps which you are unlikely to regret
1. Work out if you’re on track for a good pension
We often receive research showing many people are confused by pensions and have no idea whether they have saved enough for a decent retirement.
It is best to start from a position of certainty, so systematically investigate all your pensions and include any assets like savings, investments and property you could draw on too.
> Read more: The best self-invested personal pension providers
When it comes to private and work pensions, you need to ask schemes the following questions.
– The current fund value.
– The current transfer value – because there might be a penalty to move.
– Whether the pension is in a final salary or defined contribution scheme. Defined contribution pensions take contributions from both employer and employee and invest them to provide a pot of money at retirement.
Unless you work in the public sector, they have now mostly replaced more generous gold-plated defined benefit – career average or final salary – pensions, which provide a guaranteed income after retirement until you die.
– If there are any guarantees – for instance, a guaranteed annuity rate – and if you would lose them if you moved the fund.
– The pension projection at retirement age. You can use a pension calculator to see if you will have enough – This is Money’s calculator is here.
You should add the private pension forecast figures to what you anticipate getting in state pension, which is currently £230.25 a week or nearly £12,000 a year if you qualify for the full new rate. Get a state pension forecast here.
If you are tempted to merge your old pensions, read our guide first to ensure you won’t be penalised.
If you have lost track of old pots, the Government’s free pension tracing service is here.
Once you know what income you are on track to get in retirement, you can check it against one of the industry measures of what will be enough.
Pensions UK looks at what people typically require for a basic, moderate or comfortable retirement. Its figures do not include tax, housing costs or care bills.
Hargreaves Lansdown uses a different measure based on replacing a certain percentage of your salary.
2. Can you get more free cash out of your employer
The money you put into a work pension is topped up by your employer and the Government.
And while employers using defined contribution schemes are not as generous as they were to staff in traditional final salary schemes, they still give a significant boost to retirement savings.
Under auto enrolment, employers are required to put a minimum of 3 per cent of your earnings between £6,240 and £50,270 into your pension. Tax relief from the Government provides another 1 per cent.
You must put in at least 4 per cent on your own behalf, and if you opt out all the above is lost.
Extra top-ups are frequently available, particularly from large employers.
For example, an employer might automatically match 3 per cent of your earnings as its minimum contribution to your pension already.
But it might be willing to make 4 per cent, 5 per cent or 6 per cent in matching contributions if you opt to save a higher proportion of your income.
If you can afford to do this, you will also receive more pension tax relief from the Government than you would have done on the extra money saved towards retirement.
So it can be advantageous to divert savings to your pension to get this extra employer money, rather than sticking it in a cash Isa or other account – although it does mean you will be locking it up until retirement rather than having readier access to your funds.
Read our guide to squeezing the most out of your work pension.
3. Consider paying in a lump sum or temporarily boosting contributions
Cutting pension tax relief for higher earners is among the more radical changes Chancellor Rachel Reeves might make in the Budget.
However, she has received warnings from pension experts that practical difficulties and opposition would be hard to overcome.
There is a relatively generous annual ceiling on how much you can pay into your pension and get tax relief – the equivalent of your annual salary, up to a maximum of £60,000.
The rules are more complicated for higher earners, whose pension annual allowance is ‘tapered’ down.
It is best to max out any matched contributions from your employer as explained above, but if you have done this you can put even more into your pension and carry on benefiting from free Government top-ups.
Providing you can afford it, this is something you are unlikely to regret because it will boost your retirement savings in the longer term. Again though, it does mean locking up ready cash until you are age 55 (or 57 from spring 2028).
Earlier this month, Money Editor Rachel Rickard Straus said she was putting extra money in her pension to take advantage of the current tax relief rules.
However, instead of a lump sum she whacked her monthly contributions right up, so that it came out of her salary and she wouldn’t have to claim back the 20 per cent additional tax relief via a tax return or apply for it through HMRC’s website.
‘I’m setting a reminder for myself on my calendar for next month, otherwise, I’ll accidentally pay a huge chunk of my salary into my pension two months in a row,’ she told readers.
She added: ‘The rules may not change, so you need to be comfortable doing it whether they do or don’t.’
4. Where are you invested as crash warnings mount?
Warnings are piling up that we are in an AI bubble and could see a ‘sharp market correction’ or a market crash.
No one knows for certain, and this might not be an imminent threat – bubbles can last for years, and anyway pensions are a long term investment which usually have plenty of time to recover.
Even if you are on the verge of retirement, most people stay invested in retirement for further decades. Meanwhile, younger savers can benefit from buying stocks more cheaply after a crash.
But it is important to check how your pension is being invested. If you have a defined contribution pension, savers bear the investment risk, rather than employers.
Your employer’s default pension fund is chosen to fit the average staff member, and the vast majority, – around 90-95 per cent – stick with it.
Charges are capped at 0.75 per cent, although pension schemes often cost less because most use inexpensive tracker funds, which follow the performance of one or a selection of the world’s stock markets and are cheap to own.
Global tracker funds are dominated by US markets, which are themselves under the sway of a handful of tech companies that are heavily investing in AI.
If this is something that concerns you, it is worth looking at what else is in your ‘walled garden’ of other available funds, and thinking about whether it is worth rebalancing your investments.
The other funds usually cost a bit more but cater to those who want more actively managed, adventurous, niche or ethical investments, or a combination of the above.
Read our guide to checking if your work pension investments are any good.
You should also check if your fund is being ‘lifestyled’ – a little-known or understood investment strategy that many workers are ‘defaulted’ into in the run-up to retirement.
Savers typically see their pots shifted out of stock markets and all or part way into bonds, which have historically been regarded as the ‘safer’ option.
The process is known as lifestyling, de-risking, or sometimes target-dating, but when it starts and how it progresses varies so you will need to ask your scheme or at the very least stay alert to any communications about it.
The idea is to protect savers against abrupt downturns when they are just about to start tapping their pensions.
But anyone who wants to keep their pension fund invested perhaps for decades to come in retirement might want to consider whether it is better to opt out of ‘lifestyling’ altogether and stick with stocks, which are riskier but have more potential for long-term growth.
Here’s what you need to know about pension lifestyling.
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