Having snatched the Winter Fuel Payment from 10million retirees, chancellor Rachel Reeves could do anything. In many cases pensioners will be helpless to react, but there are still a few things they could do before Reeves stands up tomorrow, and after she sits down.
First, don’t panic. Act in haste and you could repent at leisure, especially at this late stage, when any decision will have to be a snap one.
Also, we still don’t know for sure what Labour is going to do, and basing key financial decisions on speculation is risky at any time.
You have to accept that there is only so much you can do. Having said that, some measures could pay off whatever happens, so I’ll concentrate on those.
Check eligibility for Pension Credit. Up to a million pensioners are available eligible for this means tested state pension top-up, but fail to claim.
Now they have an extra incentive to do so, as only people who successfully claim Pension Credit will still get the Winter Fuel Payment.
It will top up pensioner incomes to £218 a week, or £11,336 in total. This could be worth an extra £2,522 a year for older retires on the basic state pension.
Pension Credit also works as a gateway for Housing Benefit, Cost of Living Payments, Council Tax Reduction, support for mortgage interest, a free TV licence from age 75, help with NHS dental treatment, glasses and transport costs for hospital appointments, and the Warm Home Discount Scheme.
Pensioners will need all the remaining state support they can get after tomorrow.
Pay money into a pension. Labour sources have poured cold water on reports that Reeves will slash higher rate tax relief on pension contributions.
Until then, many higher earners were throwing money into pensions, to ensure they still got tax relief at 40% or 45%.
This can hardly be described as a mistake, though. Paying money into a pension is a good idea at almost any time, provided you understand you won’t be able to access the money until age 55 at the earliest.
While tax relief looks safe, there is a danger that Reeves could slash the pensions annual allowance, which last people to pay 100% of their salary into a pension each year, up to a maximum of £60,000.
Former chancellor Jeremy Hunt hiked that from £40,000 in March 2023, so it would be simple for Reeves to reverse it.
It may be too late to sort the admin out before the Budget, although any cut may not come into force until the new tax year on April 6, 2025.
Also, you can remember you can carry forward any unused annual allowance from the previous three tax years, after using up this one.
Consider pension withdrawals, but be careful. Speculation that Reeves will set a cap on 25% pensions tax-free lump sum has sparked a rash of withdrawals.
Today, pension savers can withdraw tax free cash up to £268,275, but Reeves may limit that to just £100,000.
This will only affect those with more than £400,000 worth of pensions, but many will be furious if she does cap the cash.
Again, it may be too late to do this if Reeves cuts the cap with immediate effect, although if worried, it may be worth talking to your pension company (assuming you can get through on their telephone lines).
Money is best kept in a pension until you need it, though, it will grow tax sufficiently. So again, tread carefully.
Use your ISA allowance. By comparison, this is a relative no-brainer. Every year, adults can invest up to £20,000 in cash ISA or stocks and shares ISA, and take all their returns free of income tax and capital gains tax for life.
Now that’s pretty generous and Reeves could slash it back. Clearly, it favours higher earners, as only 6% of all Britons use their full ISA allowance.
So if you have cash to hand, it may be worth switching it into your ISA allowance today. Although again, these may not cut the allowance until next financial year. So you should have time. Of course she may not cut it at all.
There has been talk that she could set a cap on total ISA holdings of anything between £100,000 and £500,000.
There’s not much you can do about that today. Tomorrow could be a different matter. Assuming it happens.
Consider making gifts. It would be a total shock if Labour doesn’t take the knife to inheritance tax (IHT) breaks, as it battles against wealth inequality.
Today, it may be worth boning up on how many tax-free gifts you can make today, and maxing out your allowance in case Reeves shrinks or scraps them.
She may cap or scrap the little-known “gifts out of normal expenditure” IHT exemption, but there’s little you can do about that one in advance.
Today, any gift is entirely free of IHT if you survive for another seven years after making it, known as potentially exempt transfers.
There are rumours that Reeves could extend that to 10 years. Either way, the earlier you make gifts, the better.
The chancellor is also said to be considering imposing inheritance tax on pensions, but again, you’ll just have to wait and see what she does.
Top up your tank. There’s a pretty strong chance that we will ask the temporary 5p cut to fuel duty, then add another 5p off her own. That probably won’t come into force until next April, but it may be worth loading up today, just in case.
Go to the pub. Almost every time there is a Budget, alcohol duty goes up. So it may be worth having a drink tonight. If only to settle your nerves. Your local pub needs your support, with so many closing.
Smokers might want to buy a few packs of 20, too. They’re not going to get any cheaper, that’s for sure.
