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Six major pension changes coming in 2025 you need to know – including a pay rise
MILLIONS of pensioners will get a pay rise in April next year thanks to boosts to the state pension and Pension Credit.
Those are just two changes coming in next year that will impact people’s retirement funds.
Other key changes to be aware of include ongoing plans to change how pensions work for inheritance tax purposes and pension dashboards finally becoming a reality.
Here’s everything that is currently planned for next year for pensions, and what it means for your wallet.
State pension increase
The state pension will increase by 4.1% in April 2025, thanks to something known as the “triple lock” guarantee.
The triple lock guarantees that the benefit will rise by the highest of inflation, average earnings growth and 2.5%.
This year, earnings growth was the biggest factor, and so the government has confirmed that the state pension will increase from £221.20 a week to £230.25.
This amounts to around £470 extra a year for someone who gets the full amount.
Meanwhile, the full, old basic state pension for people who retired before 2016 will increase to £176.45 per week.
Currently, it is worth £169.50 per week, or £8,814 per year.
The additional state pension is an earnings-related entitlement consisting of the State Second Pension (S2P) or its predecessor, the State Earnings-Related Pension Scheme (SERPS).
This is not triple-locked and so will rise in line with the Consumer Prices Index (CPI) inflation rate of 1.7%.
Pension Credit increase
Pension Credit is the main means-tested benefit for pensioners.
For people who reached state pension age before 6 April 2016, it has two elements – Guarantee Credit and Savings Credit.
This top-up benefit for pensioners on very low incomes will also increase by 4.1% from April 2025.
Currently, single people get their income topped up to £218.15 per week, while couples will be boosted to £332.95.
How does the state pension work?
AT the moment the current state pension is paid to both men and women from age 66 - but it's due to rise to 67 by 2028 and 68 by 2046.
The state pension is a recurring payment from the government most Brits start getting when they reach State Pension age.
But not everyone gets the same amount, and you are awarded depending on your National Insurance record.
For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings.
The new state pension is based on people’s National Insurance records.
Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension.
You earn National Insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit.
If you have gaps, you can top up your record by paying in voluntary National Insurance contributions.
To get the old, full basic state pension, you will need 30 years of contributions or credits.
You will need at least 10 years on your NI record to get any state pension.
From April 2025, this will rise to £227.10 and £346.60 respectively.
That means single retirees on Pension Credit will be £465.40 a year better off, while couples will get an extra £709.80.
People who retired before April 6, 2016 and receive savings credit will also get a boost.
The maximum award amount will increase by 1.7% in line with CPI inflation from £17.01 to £17.30 a week for singles, and from £19.04 to £19.36 a week for couples.
Pensions dashboard
The pensions dashboard project has been in the pipeline for several years now, but it’s now due to come into force from next year.
If it’s successful, it will allow you to see all your pensions savings – including your state pension – in one place.
This will help people to plan better, and should also reduce the problem of lost or forgotten pension pots.
All schemes and providers are legally required to be connected to the pensions dashboard and be ready to respond to requests for pensions information by 31 October 2026 at the latest.
However, the government has set target deadlines for larger schemes starting next year.
Every scheme with more than 1,000 members has a staging date in 2025, with medium schemes joining in 2026.
Inheritance tax changes
The government is planning to change the way that pension pots work for inheritance tax purposes.
At the moment, defined contribution pensions – where savers build up a pot of money for retirement – are typically not included as part of the estate when someone dies, which means that you don’t pay inheritance tax on them.
In the Budget, the government announced that it is planning to reform this by 2027.
This will involve some tricky untangling of trust laws, so there will likely be more updates around this over the next two years.
It could mean that some people are paying double tax on pensions through both income and inheritance tax, which would mean a tax rate of up to 67% in total.
It’s important to look out for further announcements next year if your pension could put you above inheritance tax thresholds, as it may change the way you plan your retirement spending.
Auto-enrolment changes
A pensions act passed in 2023, gave the government the power to reduce the lower age limit for auto-enrolment and reducing the lower earnings limit for qualifying earnings.
Currently, the age limit is 21, although younger employees can choose to opt in to schemes if they want to.
The lower earnings limit means that people do not contribute on income below £6,240, and removing it would mean auto-enrolment contributions are made from the first pound of earnings.
During the passage of the Act, the Government confirmed its intention to reduce the lower age limit to 18 years old.
In response to a written question in October 2023, then-Pensions Minister, Laura Trott, said that the Government will consult on the detailed implementation at the earliest opportunity and report to Parliament.
However, despite this, there has not yet been an announcement about when – if ever – the rules will change.
This could be something that’s announced or updated in 2025, potentially in the budget.
Pension superfunds
On November 14, Rachel Reeves delivered her first Mansion House speech in which she said that she wanted to introduce reforms that would create so-called “pension superfunds”.
The idea is to have fewer schemes that are bigger and can generate more income for savers because of their larger scale.
Two key measures have been proposed.
The first is to introduce minimum size requirements for multi-employer schemes and changing the rules to allow bulk transfers into schemes without individual savers’ consent.
These are significant changes, and the government is consulting on them.
The consultation closes on January 16, 2025.
New legislation could be included in next year’s Pension Schemes Bill.
One concern for the public may be the prospect of being moved from well-governed and high performing master trusts that do not meet the proposed size threshold, depending on outcomes of the consultation.
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The 45 bank branches closing in January including in London, Liverpool and Birmingham
NEXT year already spells bad news for Brits as hundreds of bank branches are expected to close.
In fact, 45 branches are planned for closure in January alone, according to data from Link, which tracks branch closures.
Banks and building societies have shut up shop on 6,214 since January 2015, with around 53 typically closing each month, according to research carried out by consumer champion Which?.
And next year looks to be no different, with plenty of closures already scheduled in.
For instance, Lloyds Banking Group plans to close 55 branches between January and September 2025, affecting 19 Lloyds branches, 4 Bank of Scotland branches, and 32 Halifax branches.
Which?’s research says that the NatWest group is the biggest offender for shutting down its branches, with 1,428 closing since 2015.
Barclays is the individual bank that has shut the most, with 1,228 closed to date.
It found that the South-East has been the hardest hit region so far, followed by London, Scotland, and the North West.
Even more concerning, Which? Found that there are 30 constituencies in the UK that now don’t have access to a single bank branch, including Liverpool Wavertree, North East Derbyshire, and Reading West and Mid-Berkshire.
Thanks to pressure from campaigners, including Link, some banks have agreed to create voluntary banking hubs, giving customers access to some face-to-face banking services.
These hubs allow you to pay in cash, withdraw cash, check your balance, pay utility bills and top up gas and electricity.
It doesn’t matter who you bank with – you should be able to use the services whatever.
Banks inform Link if a branch is closing so that it can assess whether a hub is needed.
It says it typically recommends banking hubs in local areas with at least 10,000 people and 70 shops.
It also looks at the average age and digital skills in the area, and even looks at bus routes to see which areas need services the most.
You can even lobby for a hub yourself – we recently revealed 57 towns where locals campaigned for a banking hub and won.
What services do banking hubs offer?
BANKING hubs offer a range of services to bridge the gap left by the closure of local branches.
Operated by the Post Office, these hubs allow customers to perform routine transactions such as deposits, withdrawals, and balance enquiries.
Each hub features private booths where customers can discuss more complex banking matters with staff from their respective banks.
Staff from different banks are available on a rotational basis, ensuring that customers have access to a wide range of banking services throughout the week.
Additionally, customers can receive advice and support on various financial products and services, including loans, mortgages, and savings accounts.
A full list of running hubs is available on the Cash Access UK website.
If you don’t have access to a bank, you should still be able to carry out some banking at your nearest Post Office.
Services typically include cash withdrawals, balance enquiries, cash deposits, cheque deposits, bill payments, and topping up gas and electricity.
Here are all the closures planned for January.
Bank of Scotland: four planned closures
- Dunfermline: closing January 21
- Kirkcaldy: closing January 21
- Kyle of Lochalsh: closing January 21
- Barclays, Cockermount: closing January 17
Barclays: six planned closures
- London – West End: closing January 10
- Pickering: closing January 17
- Barclays: St Neots, closing January 30
- Tredegar: closing January 17
- BarclaysL Willesden, closing January 31
- Ystrad Mynach: closing January 17
Halifax: 24 planned closures
- Alnwick branch: closing January 15
- Birmingham, Shirley: closing January 9
- Eccles: closing January 7
- Hatfield: closing January 20
- Keynsham: closing January 14
- Leighton Buzzard: closing January 20
- Liverpool – Old Swan: closing January 8
- London – Baker Street: closing January 6
- London – Edgware Road: closing January 6
- North Shields: closing January 28
- Nottingham – Bullwell: closing January 21
- Port Talbot: closing January 29
- Palmers Green: closing January 9
- Stratford-upon-Avon: closing January 22
- Stoke-on-Trent – Longton: closing January 9
- Sutton-in-Ashfield: closing January 16
- Tonbridge: closing January 9
- Walton-on-Thames: closing January 27
- Wellington (Shropshire): closing January 7
- Wetherby: closing January 13
- Winchester: closing January 21
- Wisbech: closing January 22
- Whitby: closing January 14
- York – Acomb: closing January 15
Lloyds: 11 planned closures
- Alnwick: closing January 15
- Birmingham – Shard End – Timberley Lane: closing January 27
- Derby – Allenton: closing January 23
- Gorleston-on-Sea: closing January 20
- Hull – Newland: closing January 14
- Leeds – Harehills: closing January 8
- Macclesfield, closing January 28
- Sherborne: closing January 16
- South Elmsall: closing January 16
- Wetherby: closing January 13
- Wisbech: closing January 22
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
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