What’s in store for pensions in 2025?

It’s been a big year for pensions - and 2025 looks set to usher in even more changes that could affect your retirement planning.

During 2024, we’ve seen pensions take centre-stage in the run-up to the general election and also in the Autumn Budget.

The previous Conservative government promised us “triple lock plus” if it was re-elected, while the Labour government took a sledgehammer to the Winter Fuel Payment just weeks after it won the election. The latter caused a spike in Pension Credit applications, as pensioners rushed to qualify for the now means-tested Winter Fuel Payment.

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After speculation that chancellor Rachel Reeves would cut pensions tax relief or tax-free cash, the government chose to apply inheritance tax to pensions in its inaugural Budget instead.

Meanwhile, Labour announced yesterday that it would not pay any compensation to Waspi women, despite an ombudsman recommending earlier this year payments of up to £2,950 each.

So, what’s in store for pensions in 2025? We highlight some of the key issues and trends (check out our Key money dates for 2025 article for a round-up of more personal finance changes).

1. State pension will rise

First, some good news for pensioners. The state pension will increase by 4.1% in April 2025, thanks to the triple lock. It means someone receiving the full new state pension will get £230.25 a week, or around £12,000 a year. Those on the basic state pension will see the full amount rise to £176.45 per week, bringing the total to about £9,200 annually.

This could help soften the blow of Labour’s controversial decision to means-test the winter fuel allowance.

However, retirees will need to watch out for a tax bill on their income, due to the full new state pension edging closer to the £12,570 personal allowance.

Tom Selby​​​​, director of public policy at the investment platform AJ Bell, tells MoneyWeek: “With income tax thresholds remaining frozen, we are getting ever closer to the point in time when the full new state pension is subject to income tax. This may force the government to make a decision about the future of the triple lock or its approach to income tax thresholds - or both.”

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

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

While you can usually only fill gaps in NI contributions for the past six years, under a special concession, the government is letting people claim back further to between April 2006 and April 2018.

This concession was supposed to end in April 2023 but the Department for Work and Pensions (DWP) struggled to cope with demand and people struggled to get through on the phone line. As a result, the state pension top-up deadline was extended to July 2023, and then again to 5 April 2025.

Find out more about how to boost your state pension in Should you buy National Insurance credits?

3. Pensions dashboards edge closer

According to Ian Bell, head of pensions at accounting firm RSM UK, “2025 may well be the year that public awareness of pensions goes up a notch”, due to the pensions dashboard project.

The pensions dashboard is a much-delayed multi-million-pound government project that’s been in the pipeline since 2016. When it eventually goes live, savers will be able to access their pensions information online, securely and all in one place.

Lisa Picardo, chief business officer for PensionBee, explains: “In 2025, the first pension providers will connect to the dashboard, which means they’ll send their data across and user testing can begin. The biggest pension providers are expected to be connecting into the dashboard first, followed by smaller schemes which are expected to be linked up by autumn 2026.”

Bell says it’s hoped pensions dashboards will be a “game changer for pensions, improving pensions literacy and encouraging more people to save greater amounts at an earlier age”.

The government has not yet confirmed when the dashboards will launch to the public, but it’s expected to be in 2026 or 2027.

4. More detail about how IHT on pensions will work

We should hear more detail next year about how applying inheritance tax to pension pots will work in practice. The Autumn Budget announced that from 6 April 2027, “most unused pension funds and death benefits will be included within the value of a person’s estate for inheritance tax purposes”.

The wider overhaul of IHT has caused fury among farmers, but pension experts are also concerned about the complexity and fairness of the rules.

Selby comments: “The proposal to bring unspent pensions into inheritance tax from 2027 risks turning into a nightmare unless the government urgently rethinks its plans. The reforms as set out will lead to substantial delays in paying beneficiaries, complexity and avoidable costs which will ultimately be borne by savers.”

HMRC is running a technical consultation that will finish on 22 January. So, we should find out some more detail about how the new rules will work later in 2025.

In the meantime, pension savers may change their behaviour to avoid leaving their loved ones with a big IHT liability. For example, we may see more retirees buying an annuity, or gifting more of their money during their lifetime.

We explore this further 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) recently set out proposals for how to support millions of people in deciding how to access their pension savings in retirement.

Picardo comments: "Currently, many people feel they can't afford to pay a financial adviser for help or don't appreciate the benefits, so they are making decisions about their pensions independently.

“The idea is that ‘targeted support’ would allow some pension providers to offer consumers better help and support with decision-making - although this is still at the consultation stage, so we will have to wait and see exactly who and what it would cover.”

An FCA consultation will run until 13 February, so we should find out more after that date.

6. Pension transfers could become quicker

According to Picardo, the regulator is looking at ways to make pension transfers quicker and easier.

“People should be able to move their pension savings to reputable providers without facing long delays,” she notes. “Currently, transfer times can range from several days to many months, with transfers often being abandoned due to 'sludge' practices from certain pension providers.”

7. Watch out for pension scams

Finally, while AI may speed up processes for pension providers - which could result in quicker pension transfers and other bits of admin - savers need to be on their guard for ever-more sophisticated scams.

Bell comments: “Unfortunately, with the increased use of digital tools and customer data comes increased risk of cyber threats and scams. Scammers could make use of government initiatives such as pensions dashboards as an opportunity to trick consumers out of their pensions savings.”

One good piece of news for 2025 is that hopefully we will see the demise of social media influencers giving out dodgy financial “advice”.

“We are likely to see the demise of the ‘finfluencer’, as the FCA cracks down on those giving financial advice on social media platforms without any qualifications, or recommending dubious high-risk investments,” notes Bell.