The dust is settling on the autumn budget, an event that promised to bring major changes to the pensions industry. Areas such as the amount of tax-free cash you can take from a pension and the tax relief given on pension contributions are always touted as candidates for reform, but the rumours ran red hot this year.

On the one hand, we saw people rush to top up their SIPPs to avoid any moves to slash higher and additional rate tax relief on pensions — this is something that can really help build people’s financial resilience.

However, the industry also saw heightened interest in taking tax-free cash from pensions amid rumours it could be in the chancellor’s sights.

This is something that could undermine people’s financial planning by moving it from the tax-efficient environment of a pension into another vehicle where it may be subject to the likes of capital gains or dividend tax.

Read more: Budget 2024 live: Rachel Reeves says she will raise taxes by ￡40bn

In the end, neither of these rumours came to pass, which has been greeted with widespread relief. It does, however, highlight the need for a longer-term cross-party consensus on the direction of pension taxation so people can plan ahead without fear that their hard work in building up a retirement pot will be undone by a future government.

Inheritance tax levied on pensions

The key change was to make pensions subject to inheritance tax. As it stands, inheritance tax is levied on estates worth more than ￡325,000 with further relief for those looking to pass their home down to their children/grandchildren. Pensions were not generally considered part of people’s estate for inheritance tax but from 2027 they will be. It’s a move that could bring many more people into the inheritance tax web and land families with a nasty tax bill.

The news will prompt many people to revise their financial planning in a bid to mitigate these bills. We could see people choosing to spend down their pensions and make more gifts to their loved ones during their lifetime rather than on death.

As yet, we don’t know how this change will work. It will probably need changes to trust law to make it workable. An easier solution could have been a return of the “death tax” that existed pre-Freedom and Choice and it is important that the industry engages with government during the consultation process to make sure unnecessary complication is not introduced.

State pension increase confirmed

As widely expected, the chancellor has confirmed that the state pension will rise by 4.1% from April in line with the triple lock. This will increase a full new state pension to ￡230.30 a week — ￡11,975 a year. Meanwhile the full, old basic state pension will go up to ￡176.45 a week. That will take it to ￡9,175 a year.