Autumn Budget: Your pension and investment questions answered

As the Autumn Budget approaches, it’s natural to feel some uncertainty about how it might impact your pensions and investments. Instead of reacting to speculation, it’s usually better to stay informed and make decisions based on what’s right for you and the facts available.

Here, we answer some of the most common questions about pensions, investments and tax planning.

I’m over 55 – should I take my pension tax-free cash now?

Taking your pension tax-free cash is a big decision and should be made with care. While there are rumours that the tax-free cash limit might be reduced, it’s important not to act on speculation alone. Under current rules, you can draw up to 25% of your pensions as tax-free cash, capped at £268,275 over your lifetime.

If you were already planning to take your tax-free cash and it aligns with your goals, now might be a good time. However, if your decision is driven purely by the possibility of future rule changes and you don’t actually need the money, be aware that withdrawing cash early can limit your opportunity for tax-free growth – and that could leave you short of money later in retirement.

For example, someone who withdrew a £50,000 tax-free lump sum from a £200,000 pension pot based on last year’s Budget rumours could have missed out on around 8% tax-free growth (or £4,180) by holding the money in cash instead of keeping it invested. This assumes a portfolio of 60% shares and 40% bonds¹ and that the investor is a higher-rate taxpayer who, once they’ve taken the lump sum out of their pension, pays 40% tax on the interest it earns in their cash savings account².

I’m saving for retirement – should I top up my pension?

If you can afford to top up your pension and it fits your financial plan, it’s a smart move. The Autumn Budget often brings speculation about reducing tax relief for higher-rate and additional-rate taxpayers, but at the moment the rules remain unchanged.

Personal pension contributions benefit from tax relief at your highest rate of income tax. If you pay £80 into a personal pension, an additional £20 is automatically added as basic-rate (20%) tax relief. Higher-rate (40%) and additional-rate (45%) taxpayers³ can claim back an extra £20 or £25 through their self-assessment tax return.

By contributing more to your pension now, you can take advantage of current rates of tax relief, which effectively increases the value of your contributions. Additionally, the sooner you invest, the more time your money has to grow, potentially providing a larger nest egg for your retirement.

Are the rules on pensions and inheritance tax changing?

Changes are expected, but not until April 2027. The final legislation is still to be published, but it is expected that pensions will no longer be exempt from IHT from 6 April 2027. This means that if you still have money in your pension when you die, it might be subject to IHT at 40%.

To learn more about the new rules and who will be impacted, read our previous article on what the pension and IHT changes mean for you.

Will the ISA allowance change?

We don’t know if the individual savings account (ISA) allowance will be changed in the Autumn Budget. There has been speculation in the past about reducing the annual savings limit for cash ISAs. No changes have been made so far, but the government is continuing to consider ISA reforms to ensure the system encourages the right balance between saving and investing.

If you’re thinking about topping up your stocks and shares ISA, why not do it now so you can maximise your tax-free savings? Investments in an ISA can grow free from income tax on dividends⁴ or interest, as well as capital gains tax (CGT) on any profits you make when selling investments.

For the 2025-26 tax year, the allowance is £20,000 across all your ISAs. You could also consider topping up Junior ISAs, which have an annual allowance of £9,000.

How can I reduce tax on my investments?

If you’ve already used up this year’s ISA and pension allowances, you can still manage tax on investments held outside these tax wrappers. For example, in the 2025-26 tax year, you can realise up to £3,000 of profits on your investments without paying CGT. You can’t carry forward any part of your CGT allowance into subsequent tax years, but you can carry forward losses. Learn more about how to pay less tax on your investments. 

By staying informed and planning ahead, you can make the most of your pensions and investments, whatever the Autumn Budget brings.
 

¹ Bonds are a type of loan issued by governments or companies, which typically pay a fixed amount of interest and return the capital at the end of the term.

² Source: Vanguard calculations based on the period 1 September 2024 to 31 August 2025. Shares are represented by the FTSE Global All Cap Index and bonds by the Bloomberg Global Aggregate Bond Index (GBP Hedged). With hedging, managers typically use derivatives (a type of financial contract) to offset exchange rate movements. The contracts typically lock in a pre-determined exchange rate at which the manager can buy or sell the foreign currency at a future date. Cash is represented by the Sterling Overnight Index Average (SONIA) rate. SONIA reflects the average rate of interest banks pay to borrow overnight. Calculations assume the individual has used up their personal savings allowance, which is £500 for a higher-rate taxpayer (tax year 2025-26).

³ These rates apply to taxpayers in England, Wales and Northern Ireland. For Scottish tax bands and rates see HMRC’s ‘Income Tax in Scotland’.

⁴ Dividends are the payments some companies make to their shareholders out of their profits.
 

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Past performance is not a reliable indicator of future results.

The eligibility to invest in either ISA or Junior ISA depends on individual circumstances and all tax rules may change in future.

Eligibility to invest in a Vanguard Personal Pension depends on your individual circumstances. Please be aware that pension and tax rules may change in the future and the value of investments can go down as well as up, so you might get back less than you invested. You cannot usually access your pension savings or make any withdrawals until the age of 55, rising to the age of 57 in 2028.

If you are not sure of the suitability or appropriateness of any investment, product or service you should consult an authorised financial adviser. Please note this may incur a charge.

Any tax reliefs referred to are those available under current legislation, which may change, and their availability and value will depend on your individual circumstances. If you have questions relating to your specific tax situation, please contact your tax adviser.

Important information 

Vanguard only gives information on products and services and does not give investment advice based on individual circumstances. If you have any questions related to your investment decision or the suitability or appropriateness for you of the product[s] described, please contact your financial adviser.

This article is designed for use by, and is directed only at, persons resident in the UK.

The information contained herein is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information does not constitute legal, tax, or investment advice. You must not, therefore, rely on it when making any investment decisions.

Issued by Vanguard Asset Management Limited, which is authorised and regulated in the UK by the Financial Conduct Authority.

© 2025 Vanguard Asset Management Limited. All rights reserved.

4837351