Retirement Planning in a New Tax Landscape: Why Pensions Alone Aren’t Enough

The UK Autumn Budget 2025 has introduced sweeping changes that will reshape retirement planning for millions. While pensions remain a cornerstone of retirement savings, new measures including tighter rules on salary sacrifice, frozen tax thresholds, and reduced ISA allowances mean that relying solely on pensions could leave you exposed to higher taxes and less flexibility.

This article explores why pensions alone are no longer sufficient, why diversification matters more than ever, and how innovative solutions like Hilbert Protect 90 can help advisers and investors navigate this new landscape.

Key Budget Changes Affecting Retirement Planning

1. Salary Sacrifice Cap Introduced

From April 2029, pension contributions via salary sacrifice will be capped at £2,000 per year before National Insurance applies. Anything above this will attract NI charges; 8% for earnings under £50,270 and 2% above that. This move is expected to raise £4.7bn but will reduce one of the most tax-efficient ways to boost pension savings.

2. Income Tax Thresholds Frozen Until 2031

The personal allowance (£12,570) and higher-rate thresholds will remain frozen for another three years, creating “fiscal drag.” As wages rise, more people will pay higher tax rates, even without headline rate increases.

3. ISA Allowance Cut for Under-65s

From April 2027, the annual cash ISA limit drops from £20,000 to £12,000 for those under 65. Over-65s retain the full £20,000 allowance.

Savvy investors and their advisers will be asking themselves how to use Stocks and shares ISAs more given that limit remained at £20,000 per annum.

Why Pensions Alone Aren’t Enough

These changes highlight the vulnerability of pension-only strategies. With salary sacrifice benefits curtailed and tax thresholds frozen, the tax efficiency of pensions is eroding. Add to this the looming inclusion of unused pension funds in inheritance tax from 2027, and it’s clear that diversification is essential.

But the challenge goes beyond tax policy. Longer life expectancy means retirement could last 25–30 years or more, requiring sustainable income for decades. At the same time, uncertain future costs - such as healthcare, long-term care, and inflation - make it risky to rely on a single source of retirement income. 

Pensions alone struggle to provide the flexibility or resilience needed to manage these variables. A diversified approach that combines pensions with structured investments, ISAs, and other solutions helps protect capital, generate income, and maintain growth potential throughout an extended retirement horizon.

Why Diversification Matters More Than Ever

Retirement investing requires a delicate balance: preserving capital, generating income, and participating in long-term market growth. Traditionally, many advisers have relied on Model Portfolio Services (MPS) to achieve this balance.

However, MPS strategies have often been slow to adopt outcome-based principles, such as:

• Defining risk parameters upfront
• Setting clear expectations around potential losses
• Establishing mechanisms to mitigate major market declines

This gap leaves investors exposed to unnecessary volatility and uncertainty, especially in a tax environment where traditional pension benefits are shrinking.

While diversification has been the only lever used within traditional MPS structures, and we have seen diversification in financial planning for Retirement. Where pensions are losing some of the key attributes that made them the primary product for retirement planning, ISA and onshore bonds have become more and more prominent. Solutions like Hilbert Protect 90 can be used within any investment wrapper and move beyond just diversification for resilience but also offer explicit protection because there is an insurance backed agreement to provide protection. As such, using Hilbert Protect 90, advisers can create portfolios that are not only tax-efficient but also risk-aware and resilient. ETFS with insurance allow for capital protection and growth participation, giving clients confidence that their retirement plan can withstand market shocks while still delivering upside potential.

In short, diversification today isn’t just about asset allocation, it’s about integrating risk management, tax efficiency, and flexibility into every retirement strategy.

Introducing Hilbert Protect 90

Hilbert’s Protect 90 offers a modern solution for advisers and investors seeking security and growth:

• 90% Capital Protection backed by Munich Re
• Daily Liquidity for flexibility
• Growth Potential via BlackRock-managed ETFs
• This solution helps advisers and investors navigate tax changes while maintaining control and reducing risk.

Learn more about Protect 90

Please note that Hilbert Investment Solutions does not provide investment advice or make personal recommendations. The value of investments can go down as well as up. Capital is at risk.

FAQs

1. Is Protect 90 suitable for everyone?

Protect 90 is designed for investors seeking capital protection with growth potential. It may not be suitable for those requiring guaranteed income streams.

2. How does Protect 90 differ from a pension?

Unlike pensions, Protect 90 offers daily liquidity, insurance-backed protection and exposure to ETFs, providing flexibility and security.

3. What happens if markets fall?

Your capital is 90% protected, meaning you retain most of your investment even during downturns.

4. Can Protect 90 be part of a diversified retirement plan?

Yes. It complements pensions, ISAs, and other investments to create a balanced, risk-managed portfolio.