![\"Rachel](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/10\/102701603-15161677-image-a-22_1759574374889.jpg\")
<\/p>\nAs the Budget on November 26 draws closer, the chorus of financial experts warning us not to act now \u2013 based on what we suspect or fear it may contain \u2013 grows ever louder.<\/p>\n
And in general, they are right.<\/p>\n
For example, you could come to regret taking a tax-free lump sum from your pension because you are worried Chancellor Rachel Reeves will change the rules, if she then doesn\u2019t.<\/p>\n
But last year, I acted on a hunch ahead of the Budget \u2013 which turned out to be wrong \u2013 and have absolutely no regrets.<\/p>\n
So much so that this year, I\u2019m doing the same again, only I\u2019ve fine-tuned how I go about it.<\/p>\n
Just ahead of the Budget, I\u2019m putting a lump sum in my pension to take advantage of the current tax relief rules.<\/p>\n
Tax relief, which is designed to encourage us to save for retirement, is almost impossibly generous \u2013 and I fear ripe for the chop. Normally, if someone offered you an investment guaranteed to almost triple your money overnight, I\u2019d tell you to run a mile. But pension saving is one surprising exception.<\/p>\n
<\/p>\n
Rachel Reeves is due to deliver her heavily anticipated Budget on November 26<\/p>\n
![\"'Ahead](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/10\/102701595-15161677-_Ahead_of_the_Budget_I_m_putting_a_lump_sum_in_my_pension_to_tak-m-1_175957517703.jpeg\")
<\/p>\n
‘Ahead of the Budget, I\u2019m putting a lump sum in my pension to take advantage of the current tax relief rules,’ writes RACHEL RICKARD STRAUS<\/p>\n
Contributions made into a pension get income tax<\/a> relief. This means that if you\u2019re a basic-rate taxpayer and put \u00a380 into your pension, it will be topped up to \u00a3100 by the taxman. Higher and additional-rate taxpayers need only put \u00a360 and \u00a355 in respectively to get \u00a3100.<\/p>\n This takes you back to the position before tax was paid. On top of that, if you save into a workplace pension, you benefit from contributions from your employer as well. If you put in a minimum of 5 per cent, they should put in 3 per cent, but many employers are more generous than this.<\/p>\n And, if your pension is part of a salary sacrifice scheme, you\u2019ll save on National Insurance contributions as well. This scheme allows you to exchange part of your salary for a pension contribution of the same size, resulting in a lower NI bill for you and your employer (which may keep its saving for itself, or share it with you).<\/p>\n Bundle that all together and, for a higher-rate taxpayer, every \u00a360 post tax you put into your pension could be bumped up to \u00a3162 if your employer matches your contributions \u2013 and that\u2019s before any potential investment returns.<\/p>\n This comes from higher-rate pension tax relief turning \u00a360 into \u00a3100, plus a \u00a360 matched employer contribution and for those who can use salary sacrifice, an extra \u00a32 benefit from avoiding 2 per cent higher NI contributions.<\/p>\n Of course, you should have already taken maximum advantage of employer contributions. But even if you have done that, \u00a360 after tax paid into a pension is turned into \u00a3102.<\/p>\n When you eventually take money out of your pension, you will pay income tax on it. But most higher- rate taxpayers become basic-rate in retirement so they benefit from a 40 per cent tax break when they put money in and pay only 20 per cent when they take it out. Financial experts are warning this generous tax perk could be under threat in next month\u2019s Budget \u2013 and it\u2019s no wonder.<\/p>\n When other tax breaks to encourage saving and investing are being slashed or eroded away, the generosity of pension tax relief looks increasingly exposed.<\/p>\n The amount of capital gains you can earn in a single tax year has been slashed to \u00a33,000 from \u00a312,300 just a couple years ago.<\/p>\n The Isa<\/a> allowance has been stuck for eight years. Had it risen in line with inflation<\/a>, it would be \u00a326,300 today. The personal savings allowance that allows basic rate taxpayers to earn \u00a31,000 of interest tax-free has not risen since it was introduced in 2016. If it had, it would now be worth closer to \u00a31,380 a year.<\/p>\n The amount of capital gains you can earn in a single tax year has been slashed to \u00a33,000 from \u00a312,300 just a couple years ago<\/p>\n No wonder so many believe it\u2019s only a matter of time until pension tax relief suffers a similar fate, especially as it \u2018costs\u2019 the Government around \u00a350billion a year. Of course, the Chancellor may leave it untouched. I\u2019ve reported on Budget statements for more than 15 years and, every time, financial experts raise the possibility that pension tax relief will be meddled with. And yet it has never happened.<\/p>\n Many a Chancellor has considered it and then backed down when they realise the complexity involved and how much they would upset higher earners in the public sector, particularly, such as some doctors.<\/p>\n I\u2019m willing to take the risk and put a lump sum in my pension now because, really, it\u2019s win-win.<\/p>\n If the rules change, I\u2019ll be grateful I took advantage of the current generosity while I could. And if they don\u2019t, I\u2019m unlikely to regret topping up my pension as the earlier you put retirement money aside, the longer you have for it to grow. You just have to be sure that you won\u2019t need the money sooner.<\/p>\n But this time I\u2019m taking a different approach, having come unstuck last year.<\/p>\n Last time, I contacted my pension provider and asked to put a lump sum into my workplace pension. That bit was straightforward and I received basic rate tax relief automatically.<\/p>\n As I\u2019m fortunate enough to be a higher-rate taxpayer, I had two options: either claim back the 20 per cent additional tax relief if I file a tax return (I don\u2019t) or apply for it through HMRC\u2019s website, which is the option I went for.<\/p>\n The form was not straightforward. HMRC are notoriously hard to get hold of on the phone to check everything is filled out correctly and, months later, I\u2019ve still to receive the tax I\u2019m owed. So this time, instead of a lump sum, I\u2019ve whacked my monthly contributions right up by that amount.<\/p>\n That way, my extra pension contribution will be taken from my salary as usual, with no form-filling or waiting required. The advantage of this is that the tax relief is applied at the correct level automatically, cutting out the HMRC faff.<\/p>\n And because I\u2019m doing it through my salary, I save on NI through the salary sacrifice scheme my employer offers. If you have a sum you can do without until retirement, a pension contribution now may be worth considering.<\/p>\n The rules may not change, so you need to be comfortable doing it whether they do or don\u2019t.<\/p>\n About 12 years ago, a former colleague was so convinced pension tax relief would be cut back he diverted all his household savings \u2013 including those of his children \u2013 into his pension so he could take advantage of it. No doubt he\u2019s ended up with a very good rate of return on that cash, but his dash to beat the deadline looks comically unnecessary now. And I hope he had no regrets throughout his children\u2019s expensive university years.<\/p>\n There are some limits to how much you can put in, so you should check with your pension provider or financial adviser before going ahead.<\/p>\n If you\u2019re a basic-rate taxpayer, however, you may want to wait until after the Budget.<\/p>\n It is unlikely Ms Reeves would scrap tax relief altogether \u2013 although former chancellor George Osborne recently revealed he considered it when he was at the helm of the Treasury.<\/p>\n It is more likely that the current system would be replaced with a flat rate. Perhaps all savers would get 20 per cent tax relief \u2013 regardless of income tax bracket. Or the flat rate could be a higher \u2013 25 or 30 per cent, for example. In this case, higher and additional-rate taxpayers would be worse off \u2013 but basic-rate taxpayers would be better off under the new rules.<\/p>\n As I\u2019m mitigating against future regrets, there are two more steps I\u2019m taking. Firstly, I\u2019ve made sure I\u2019m happy with where my lump sum will go. Last year\u2019s was invested in a global basket of companies that has returned around 18 per cent. I was lucky. This time, I am diversifying a little, as the last thing I\u2019d want is to invest a lump sum just before a stock market fall.<\/p>\n And, secondly, I\u2019m setting a reminder for myself on my calendar for next month, otherwise, I\u2019ll accidentally pay a huge chunk of my salary into my pension two months in a row, which I can\u2019t afford: do not forget to slash your monthly contributions back down again.<\/p>\n","protected":false},"excerpt":{"rendered":"As the Budget on November 26 draws closer, the chorus of financial experts warning us not to act…\n","protected":false},"author":2,"featured_media":179912,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[84,59,6243,2222,3880,56,54,55],"class_list":{"0":"post-179911","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-business","9":"tag-gb","10":"tag-mailplusmoney","11":"tag-money","12":"tag-thisismoney","13":"tag-uk","14":"tag-united-kingdom","15":"tag-unitedkingdom"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/179911","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=179911"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/179911\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/179912"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=179911"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=179911"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=179911"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"The](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/10\/102701597-15161677-image-a-24_1759574384677.jpg\")
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