The expert’s proposed changes could have a major impact on low-income workers in multiple ways (Image: GETTY)
The upcoming spring statement from Rachel Reeves on Wednesday, March 26, 2025, could hold significant changes ahead of the tax, pension and benefits revamp set for next month.
Amidst ongoing speculation about potential announcements, Lisa Picardo, Chief Business Officer UK at , is calling on the chancellor to implement five specific changes.
To support younger and lower-income workers, the expert proposed two critical adjustments to Auto-Enrolment, the process where employees are automatically signed up for workplace pension schemes based on age and earnings criteria.
Currently, workers have to be at least 22 years old and earn a minimum of £6,240 annually. However, Picardo advocates for lowering the age threshold to 18 and eliminating the earnings limit altogether.
She elaborated: “(This change) would give millions more workers access to pension saving from day one, expanding the reach, narrowing pension saving gaps and supporting better engagement.”
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“Contributions made earlier in working life can be the most valuable because of compound growth. These simple, long-overdue changes could help transform the nation’s retirement savings and must be implemented without further delay.”
She also called for a hike in the minimum contributions to auto-enrolment pensions to keep up with growing life expectancy.
She cautioned: “The current minimum contribution amount of 8% will not be enough for most people to fund a moderate living standard in retirement. Raising the level of contributions is key to ensuring savers have enough for later life.”
These workplace schemes usually hold a bit of tax relief to incentivise both companies and savers, however, Lisa pointed out this rate of savings is equal to the worker’s income tax band.
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In other words, higher earners enjoy up to 45% tax relief while basic rate taxpayers receive only 20%.
To correct this imbalance, the PensionBee specialist recommended implementing a flat tax relief rate of 30%, benefiting low-income contributors by accelerating their pension growth and enhancing the incentive for them to save.
Furthermore, Lisa urged the Chancellor to introduce a 10-day deadline for pension transfers, to stop savers waiting months for their funds to be moved.
The expert’s final recommendation isn’t a change but instead a confirmation that there won’t be one.
Before Reeves’ first budget in October, rumours spiralled that the tax-free allowance for withdrawing 25% of your pension would be axed.
The speculation became so intense some people withdrew their funds ahead of the budget just in case, but the topic was never even glanced over.
Now, the rumours are starting up again and Lisa pleaded with the Chancellor to confirm whether the tax-free lump sums are not at risk.
She shared: “The government must commit to keeping the current allowance in place, giving savers the stability they need to build and plan for a secure future, without the fear of sudden policy changes moving the goalposts.”