Spring Statement 2025: ‘as you were’ for now but stage set for Budget

Chancellor Rachel Reeves delivered a Spring Statement which was very limited, but sets the stage for the Autumn Budget, according to those in the industry.

Ahead of the statement today (March 26), there were rumours that Isa reforms and changes to tax thresholds were firmly on the agenda, but these were left untouched by Reeves.

“The chancellor has remained true to her principle of sticking to one fiscal event per year and for many, it’s ‘as you were’ following the Spring Statement,” said Mike Ambery, retirement savings director at Standard Life, part of Phoenix Group.

However, he said that the squeeze on the public purse is clear and it seems the stage is set for a more significant Autumn Budget.

Experts predicted the government could continue to tax by ‘stealth’ by extending the freeze on income tax thresholds beyond 2028.

Back in October, Reeves said she would end the freeze of the thresholds and raise them in line with inflation from 2028.

However, Reeves stayed quiet with no mention of thresholds at all.

Additionally, treasury minister Emma Reynolds had questioned the tax incentives provided by saving in cash Isas and there was speculation the chancellor might consider reducing the £20,000 tax-free annual allowance for cash Isas.

But that wasn’t the case either.

Carol Knight, chief executive of The Investing and Saving Alliance (Tisa), said: “Using a stick, by cutting the tax benefits of cash Isas is not the way to boost the investment culture in the UK.”

Knight said better routes for consumers to access meaningful advice, guidance and education are essential to unlocking personal investment.

‘Silence on pensions crisis’

Prior to the statement, some thought there would be a mention of pensions, albeit in a subtle way.

Lisa Picardo, chief business officer UK at PensionBee, said: “It’s disheartening to see that pensions have been sidelined in the Spring Statement.

“While there are a lot of important issues being addressed, there is growing evidence that millions of Britons are simply not saving enough for retirement, and the government has chosen to overlook potential ‘quick-win’ reforms that would signal the importance and actively help individuals build long-term financial security.”

Although pensions were unlikely to appear, people thought there would be some information on ongoing work in this area.

Ambery said: “The power of pension to unlock investment in the economy has been a major focus for the government and has been a frequent reference point for the chancellor ahead of the forthcoming publication of the Pensions Investment Review.

“There was no mention today of the second phase which will examine the equally important issue of savings adequacy and whether the pension system is on track to deliver the outcomes people want and expect.”

After speculation earlier this year that the review had been postponed, Ambery said he is hopeful that there will be more on the timings for review in the coming months.

State pension

Steven Cameron, pensions director at Aegon, said the statement included a single pensions mention relating to future changes to pension scheme investments.

“This is likely to lead to workplace pensions placing more of their members’ funds in investments designed to boost UK economic growth, while also hoping to deliver better returns for pension savers,” he said.

“We know further changes are coming in this summer’s pension schemes bill which will include new measures to ensure all pensions offer good value for money and plans to consolidate small pension pots individuals may have left behind when changing employers.

“Furthermore, we expect new requirements for pension scheme trustees to go further in designing default retirement income strategies for members who do not want to make choices for themselves.”

Looking ahead, should budgetary pressures worsen, Cameron said changes to the state pension cannot be ruled out.

The OBR’s latest forecasts confirm that we are fast approaching a “bizarre tax cliff edge for pensioners”, said Jon Greer, head of retirement policy at Quilter.

With the state pension forecast to rise by 4.6 per cent in April 2026 under the triple lock, it will land just below the frozen personal allowance.

“That leaves the UK potentially only one year away from pensioners having to effectively hand a portion of their state pension back to the exchequer in tax, which to many would seem perverse,” Greer said. 

There is an ongoing review of the state pension age, and government finances may necessitate further or faster increases, with an increase to age 68 is already scheduled starting from 2044. 

“Reeves had committed to keeping allowances frozen until 2028 but, depending on what the actual uprating figure may be, could look to avoid the full state pension exceeding the personal allowance via the Autumn Statement later this year,” he said.

“What was intended as a mechanism to protect pensioners from poverty is now colliding with fiscal drag.”

This situation is the result of the triple lock producing some significant increases in the state pension due to high inflation and earning figures while the government has not uprated tax thresholds in tandem.

“While the government is currently committed to maintaining it, the formula might be adapted,” Cameron added.

National Insurance

Meanwhile, the planned hike in National Insurance for employers, coming into effect on April 6, is set to add more strain on businesses, particularly those already struggling with rising wage pressures and cost inflation.

“The higher cost of doing business may increase unemployment rates, will inevitably impact wage growth, and may also lead to reduced employer pension contributions,” Picardo said.

“It’s essential that employers and individuals continue to recognise the critical importance of pension saving and avoid the temptation to reduce or postpone pension contributions, especially when the long-term benefits far outweigh any easing of short-term pressures.”

As the tax burden increases, she argued that pension contributions should be seen as one of the most effective ways to safeguard financial futures.

Marking the first statement from a new government, she said it potentially sets a “worrying tone” for the years ahead – suggesting that these types of pension reform are not a priority.

“We cannot afford to keep kicking the can down the road when it comes to pension reform,” she added.

“Every year of inaction risks leaving more people financially vulnerable in later life.”

sonia.rach@ft.com