The Pensions UK report is relevant to everyone. It will feed into the Pension Commission and so should thinking of people like David Warwick and Andrew Young, who feature in this blog.
And so is this comment from Andy Young, a former actuary to the DWP when at GAD.
I think that that is what the Pensions Commission is doing, at least I hope it is. For their is very little reason for most commercial organisations to spend time on the poor.
We did of course have a Government pension called the Second earnings related pension scheme (SERPS) that set out to pay income to everyone working – whether they were in a workplace pension scheme or not. Companies with workplace pensions could contract out of SERPS and pay it themselves and they got a rebate of national insurance for doing so.
Then it wasn’t just companies but individuals who could have their national insurance payments paid into a personal pension (they didn’t pay less national insurance but they got a proportion of their NI payments into their pot instead of a pension.
And so popular was “contracting out” by employers and employees” that the Government was to cut down the payments from SERPS from the original vision of Barbara Castle in 1978. It changed its name in 2002 to Second State Pension (S2P) and it withered to a point that in 2016 it closed and the State Pension took over a single system going forward. You can read all about it and the intricacy of moving from one system to another from this link.
If not the dismantled SERPS – then what?
Andrew Young (quoted above) believes that the state (not commercial companies) should have charge of providing a second pension to those on low incomes. He has talked to me and many others of a CDC scheme run by the Government that is funded using a defined contribution from the Treasury – organised by the DWP and paying an earnings related pension.
The point is that it does what Sweden does and what the FT reports the Germans want to do and pays benefits from a central fund. Of course there are differences between systems. The Germans talk about putting a backstop in met by the tax-payer when the markets can’t pay the promised pension (for instance). I imagine that a funded state CDC scheme would not have this but nor would it be a commercial venture and as a state pension arrangement it would have great appeal to those who see pensions as the job of Government.
I don’t suppose that many wealthy people will consider this important and to them it isn’t. But if we are to have a pension system that pays earnings related pensions to those on low wages, a state funded pension scheme makes a lot of sense to me.
Not all impacts on creating a strong and healthy personal financial balance sheet are viewed through the lens of pensions. It is not news but the UK tax take is only going one way. Navigating this minefield is a challenge for advisers. Pensions are in the cross hairs of the Treasury.
Looking across the full landscape—including Dan Neidle’s policy analysis, recent real-world fiscal decisions, and official policy timelines over the next 4 years (2026–2030)—the UK’s strategy for raising taxes is clearly defined.
Because the government explicitly ruled out raising the headline rates of the “big three” (Income Tax, VAT, and National Insurance), the approach relies heavily on fiscal drag and targeting passive asset wealth (dividends, savings, property, and pensions).
The map of confirmed and predicted tax increases over the next 4 years breaks down as follows:
Phase 1: Already Underway or Looming (2026–2027)
The Baseline Engine: Extended Fiscal Drag (Huge Revenue)
The freeze on personal allowance (£12,570) and the higher-rate threshold (£50,270) has been officially extended out to April 2031. As inflation and wages rise over the next four years, hundreds of thousands of people will naturally cross into higher tax brackets. This is the single largest multi-billion-pound stealth tax generator in play.
Dividend Tax Increases (April 2026)
Basic and higher-rate dividend taxes are increasing by 2 percentage points. The basic rate rises from 8.75% to 10.75%, and the higher rate rises from 33.75% to 35.75%.
Business Asset & VCT Relief Slashes (April 2026)
The tax rate for capital gains under Business Asset Disposal Relief (BADR) is increasing from 14% to 18%. Simultaneously, upfront tax relief on Venture Capital Trusts (VCTs) is being slashed from 30% down to 20%.
Remote Gaming Duty Jump (April 2026)
Online gambling companies are facing a significant sector-specific tax hike, with remote gaming duty practically doubling from 21% to 40%.
The Fuel Duty Unwind (Late 2026)
The long-standing fuel duty freeze is ending, with incremental increases scheduled across 2026 (including reversals of the temporary 5p cut).
Phase 2: The Next Horizon (2027–2028)
New Property and Savings Income Tax Brackets (April 2027)
The government is introducing an entirely separate, higher tax regime for passive asset income. Tax on property rental income and savings interest will jump by 2 percentage points across all bands, creating a new structure:
Basic Rate: Rises to 22%
Higher Rate: Rises to 42%
Additional Rate: Rises to 47%
Pensions Squeezed via Inheritance Tax (April 2027)
Unspent private pensions—historically exempt from inheritance tax (IHT) and a primary tool for passing wealth down generations—will officially be brought into the IHT net.
The Cash ISA Squeeze (April 2027)
The maximum amount individuals under 65 can deposit cleanly into a tax-free Cash ISA will drop sharply from £20,000 down to £12,000. (The remaining £8,000 allowance will be restricted strictly to Stocks & Shares ISAs).
Phase 3: Longer-Term Revenue Seekers (2028–2030)
The “Mansion Tax” / High-Value Council Tax Surcharge (April 2028)
Properties in England valued over £2 million will be hit with a new annual surcharge. It acts as a de facto wealth tax on primary residences, starting at £2,500 per year and rising to £7,500 per year for homes worth over £5 million (indexed to inflation thereafter).
Inheritance Tax Cap Freeze Renewal
The core IHT nil-rate bands (£325,000 and £175,000) will remain completely frozen until at least 2031, ensuring more estates face the 40% tax over the coming four years as property values grow.
Highly Probable Future Policy Options
If a future Chancellor needs to bridge immediate structural gaps (like the unfunded £4.7bn defense spending noted in Neidle’s piece), the options that fit within the government’s strict rules but haven’t been fully deployed yet include:
Closing the Commercial Property Stamp Duty Loophole: Applying standard Stamp Duty Land Tax (SDLT) to high-value commercial buildings sold via offshore corporate “envelopes” (estimated at £1bn+).
Aligning Capital Gains Tax with Income Tax: Reforming CGT thresholds to target non-risk assets rather than active investments.
Targeting Lifetime Giving: Limiting the “7-year rule” or clamping down on the “normal expenditure out of income” exemption for large, untaxed lifetime gifts.
For less wealthy people, the pensions and means-tested benefits systems need to be considered together. As I recall, the basic figures are that Pension Credit scales back penny for penny with pension income, Housing Benefit scales back by 65p in the pound and Council Tax Reduction by 20p in the pound. Many of those renting their homes will be on Housing Benefit.
This means that poorer pensioners get no net benefit at all from the money they and their employer have put into a pension if they are on Pension Credit, at least if they take their pension as regular money. For those above that level, there will be some very serious scaling back of net benefit from a regular pension.
In another forum I posed this question when considering The Pensions Commission:
“Should employers who guarantee a certain minimum level of pension income be rewarded (e.g. by an additional tax credit) and would this help with pension adequacy issues, particularly for the lower paid, ermployment mobile, and with the gender pensions gap?”.
We used to have this with the NI contracted out contribution rebate in return for a Guaranteed Minimum Pension.
My very initial thoughts are that the guaranteed retirement income could be the current auto-enrolment minimum DB accrual of 1/120th with Minimum Rate revaluations; but based on either band earnings or national average salary, whichever greater. The national average salary link would provide a minimum retirement income (on current figures) of £333 for each employment year,. This would make a reasonable reduction in the cost of the Pensions Credit and Housing and other means tested benefits to offset the cost of the tax credit to the Treasury, and for individuals mitigate any future loss of the Triple Lock.
Could this be adapted for a CDC scheme (e.g. a guaranteed GMP element as part of the targeted retirement income) funded by a higher employer contribution utilising the tax credit?
We would also need rules to include part time workers and the the self-employed.