City Bonuses Set to Surge This Spring Amid Regulatory Shift
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A wave of optimism is sweeping through the financial sector as City workers anticipate significantly larger bonuses this spring, fueled by new regulations and strong market performance. The coming bonus season will be the first to fully reflect changes made last October, shortening the deferral periods for bank bonuses – a move reversing rules implemented after the 2008 financial crisis.
Regulatory Changes Drive Optimism
The relaxation of bonus deferral rules is a key driver of the anticipated increase in payouts. Previously, a substantial portion of bonuses was held back for several years, intended to discourage excessive risk-taking. The revised regulations allow senior staff faster access to a greater share of their earnings, injecting immediate liquidity into the system. This shift has contributed to a broader positive sentiment among professionals in the financial sector and related industries.
Strong Market Performance Bolsters Payouts
Beyond the regulatory changes, a surprisingly robust market performance in 2025 is expected to further inflate bonus pools. Despite ongoing global uncertainties, “2025 turned out to be a fantastic one across most markets, although returns were quite concentrated,” noted a managing director at Evelyn Partners. Specifically, strong gains in big tech, banking, and commodities stocks are expected to translate into substantial rewards for employees in those sectors.
Sectoral Disparities Emerge
While the overall outlook is positive, the benefits are not evenly distributed. UK tax professionals and wealth managers have experienced high demand for their services following a series of challenging government budgets. However, fund managers have faced headwinds as passive investment strategies continue to outperform active management. Furthermore, the sluggish UK IPO market has dampened lucrative fees for investment bankers, lawyers, and consultants.
Deferred Stock Awards Poised for Gains
Bankers who hold share awards deferred from previous bonuses are particularly well-positioned to benefit. “The biggest factor this year is a lot of deferred stock is now looking much healthier given the run up in bank share prices,” explained a co-founder of Permanent Wealth Partners. Shares in major UK banks – NatWest, Barclays, and HSBC – have all increased by 50 percent or more over the past 12 months, significantly boosting the value of these deferred awards. This surge in value is expected to keep financial advisors busy and provide a boost to the hospitality sector.
Tax Planning and Relocation Considerations
The approaching bonus season is also prompting employees to reassess their financial strategies. Many are likely to maximize salary sacrifice contributions to their pensions before new restrictions take effect, as announced in November’s Budget. Changes limiting the tax advantages of venture capital trusts (VCTs) are also influencing investment decisions. With income tax thresholds remaining constrained, some readers are even considering relocating overseas to improve their earning potential.
FT Reader Survey Gauges Bonus Expectations
For the fifth consecutive year, the Financial Times is conducting an anonymous bonus survey to gather insights into employee expectations and intentions. Last year’s poll revealed that over half of respondents received a larger bonus than the previous year, although many reported increased workloads and challenges related to tax increases and evolving performance metrics. The survey, accessible [via this link](link to FT survey), takes less than three minutes to complete, with results to be published in the coming weeks. The deadline for submissions is Sunday, February 8. Queries can be directed to [email protected].
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