What Lies Ahead for Pensions in 2025?

This year has been significant for pensions, with expectations of even more changes in 2025 that could impact your retirement plans.

Throughout 2024, pensions have been a hot topic during the lead-up to the general election and the Autumn Budget.

The previous Conservative government pledged a “triple lock plus” upon re-election, whereas the new Labour government quickly altered the Winter Fuel Payment policy, making it means-tested. This led to a surge in Pension Credit applications as pensioners sought to qualify for the adjusted Winter Fuel Payment.

Amidst speculation that Chancellor Rachel Reeves might reduce pensions tax relief or tax-free cash, the government instead decided to apply inheritance tax to pensions in its first Budget.

In addition, Labour announced it would not compensate Waspi women, despite an ombudsman’s earlier recommendation for payments of up to £2,950 each.

So, what’s expected for pensions in 2025? Here are some key issues and trends to watch out for (see our Key money dates for 2025 article for more personal finance changes).

1. State pension will rise

Good news for pensioners: the state pension will increase by 4.1% in April 2025, due to the triple lock. This means those on the full new state pension will receive £230.25 per week, or about £12,000 annually. Those on the basic state pension will see an increase to £176.45 weekly, totaling around £9,200 a year.

This could ease the impact of Labour’s decision to means-test the winter fuel allowance. However, retirees should be mindful of potential tax implications, as the full new state pension approaches the £12,570 personal allowance threshold.

Tom Selby, director of public policy at AJ Bell, tells MoneyWeek: “With income tax thresholds remaining frozen, the full new state pension may soon be subject to income tax. This may force the government to reconsider the future of the triple lock or income tax thresholds—or both.”

2. Deadline to buy NI credits and top up state pension

The 2024-25 tax year end marks the deadline to boost your state pension. You have until 5 April to make a backdated claim for National Insurance (NI) credits to 2006, enhancing your state pension.

Normally, you can fill NI contribution gaps for the past six years, but a special concession allows claims back to April 2006 to April 2018. This concession was extended due to high demand and call center issues, with the new deadline set for 5 April 2025.

Learn more about boosting your state pension in Should you buy National Insurance credits?

3. Pensions dashboards edge closer

Ian Bell, head of pensions at RSM UK, suggests that “2025 may be the year that public awareness of pensions significantly increases,” thanks to the pensions dashboard project.

This long-awaited government initiative, in development since 2016, will allow savers to access their pension information online, securely, and all in one place.

Lisa Picardo, chief business officer for PensionBee, notes: “In 2025, initial pension providers will connect to the dashboard, enabling data sharing and user testing. Larger providers will connect first, followed by smaller schemes by autumn 2026.”

Bell believes pensions dashboards could revolutionize pensions, enhancing literacy and encouraging earlier and greater savings.

The government has not confirmed a public launch date yet, but it’s expected in 2026 or 2027.

4. More detail about how IHT on pensions will work

We can expect to learn more next year about inheritance tax on pensions. From 6 April 2027, most unused pension funds and death benefits will be included in a person’s estate for inheritance tax purposes, as announced in the Autumn Budget.

This broader IHT overhaul has angered farmers, and pension experts worry about the complexity and fairness of the new rules.

Selby comments: “The proposal to include unspent pensions in inheritance tax from 2027 could become problematic unless the government revisits its plans. The reforms may cause delays, complexities, and costs that savers will ultimately bear.”

HMRC’s technical consultation ends on 22 January. We should learn more about the new rules’ implementation later in 2025.

Meanwhile, pension savers might adjust their strategies to avoid leaving significant IHT liabilities to their heirs, possibly by purchasing annuities or gifting more money during their lifetime.

We further explore this in Pensions face “double tax” due to inheritance tax change – what are your options?

5. More help with pension decisions

The Financial Conduct Authority (FCA) has proposed ways to assist millions in accessing their pension savings in retirement.

Picardo remarks: “Many people feel they can’t afford financial advisers or don’t see the benefits, so they make pension decisions independently.”

“The idea is that ‘targeted support’ would enable some pension providers to offer better decision-making assistance—though this is still under consultation, so we’ll have to wait to see the specifics.”

An FCA consultation runs until 13 February, with more details likely to follow.

6. Pension transfers could become quicker

Picardo indicates that the regulator is exploring ways to expedite pension transfers.

“People should be able to transfer their pension savings to reputable providers without excessive delays,” she emphasizes. “Currently, transfer times vary from days to months, often abandoned due to ‘sludge’ practices from some providers.”

7. Watch out for pension scams

While AI might streamline processes for pension providers, leading to faster transfers and other administrative tasks, savers must remain vigilant against increasingly sophisticated scams.

Bell warns: “With the rise of digital tools and customer data comes a greater risk of cyber threats and scams. Scammers might exploit government initiatives like pensions dashboards to deceive consumers out of their pension savings.”

In 2025, we hope to see the decline of social media influencers offering questionable financial “advice.”

“We’re likely to see a reduction in ‘finfluencers’ as the FCA cracks down on unqualified financial advice on social media platforms, often involving high-risk investments,” Bell adds.