The November 2025 budget – what it means for financial professionals

Not since Liz Truss’ infamous budget of 2022 has there been so much press attention for the famous red box. The rumour mill had been working overtime of late, but the biggest surprise of all came with the budget being leaked early! 

The 2025 Budget delivered significant changes, particularly in relation to pensions and ISAs, with the effects being felt across the financial services sector. 

Pensions

It has become something of a tradition at budget time – anticipate which changes may be made to pensions, and wait with bated breath as those changes are not announced. This is particularly the case with salary sacrifice – often changes are rumoured, but have never been followed through. However, it felt different this year and the government announcement, that only the first £2,000 of pension contributions made via salary sacrifice each year will qualify for the national insurance exemption, likely came as no surprise. There was wide-spread criticism of the proposed change, before it had even been confirmed, and whilst still not the news that many hoped for, the 2029 implementation date does provide advisers, employers and employees with sufficient time to prepare. 

So, what will the change mean in real terms? For employees (particularly those with higher salaries) it will impact the amount of money taken home each month and will mean those higher earners might decrease their pension contributions. 

Whilst we understand why the government has taken this step, it does seem to contradict the FCA’s own concerns that we are heading towards a retirement income crisis. The anticipation is that by 2040, over 50% of people aged over 60 will need to rely on housing wealth to support their income – so it is peculiar that the government are taking steps which will discourage people from investing into their pension. It seems the government have favoured short-term advantages, at the detriment of future retirement planning.

ISAs

ISAs have long been held as a safe, tax-efficient saving mechanism, but the government seem keen to push savers away from cash and towards investment. From April 2027, those under 65 will only be able to invest £12,000 into cash ISAs, with the remaining £8,000 being invested in Stocks & Shares ISAs. It seems the intention is to increase investment in UK companies, for which we can see the benefit. However, savers may feel hesitant – cash ISAs offer predictability and many retail investors will want to avoid the risk and volatility of the investment market. 

Whilst there is a plan to offer targeted support for investors, this relies on the assumption that people will be willing to change their long-held investment approach and not just put the remaining £8,000 into another saving vehicle (i.e. a standard savings account). It is a big change and one many investors may feel uncomfortable taking.

From an advisers perspective, it is a double edged sword – many investors could benefit from a diversified investment portfolio, whilst some clients will now need to revisit their long-term plans and may be unhappy with the outcome. It seems likely that advisers will be needed now more than ever. 

Is it time to rethink the budget process?

No, not because it leaked early and we certainly do not have the answer of a perfect model. However, the current system is becoming increasingly burdensome on advisers. The fact that some of the rumoured changes did not make their way into the budget is a reminder of the damage that these ‘leaks’ can have. The difficulty is that each year, speculation of the potential changes causes unnecessary confusion for savers. Advisers come under pressure to prepare their clients for potential change, which then never come to fruition. Advisers are expected to predict the impact to their clients, on entirely hypothetical situations. Advisers could face claims for recommending changes, when it becomes apparent that they were unnecessary, or for failing to listen to the rumour-mill and recommend changes in advance. An impossible situation for advisers and one that seems to be getting worse each year.

Comment

Advisers will need to ensure that retirement income recommendations have been revisited. Salary sacrifices have often been considered a ‘safe’ option and one which allows individuals to manage their affairs in a tax-efficient way, whilst also allowing pension funds to grow. After 2029, these will be a significantly less attractive option and whilst there are over three years until the changes come into force, advisers will need to be prepared. 

In terms of the changes to ISA’s, the role of the adviser has never been needed more. Many customers are comfortable investing £20,000 into an ISA without advice, but how many of those would be willing to invest £8,000 into a stocks and shares ISA, without advice? I imagine the number would be significantly different and so advisers will find themselves increasingly involved in previously ‘simple’ investments. 

As noted, the push towards varied investment will increase the demand and need for fund managers and advisers. However, with more opportunities, come more risks, and advisers will need to ensure they are still investing appropriately and in line with their individual risk attitude.