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Try it nowAutumn Budget 2025: What it means for pension savings
New limits for salary sacrifice and pension saving
From April 2029, if you pay more than £2,000 a year into your pension using salary sacrifice, you and your employer will have to pay National Insurance (NI) on the extra amount.
If you save less than £2,000 a year using salary sacrifice, this change will not affect you.
What is salary sacrifice?
Salary sacrifice is an arrangement between you and your employer. If your employer offers salary sacrifice, you can give up part of your pay, and your employer pays this amount into your pension.
Salary sacrifice can help to reduce the amount of income tax and NI you pay on your earnings. Your employer may also pay less NI. You might see it called either ‘salary sacrifice’ or ‘SMART’.
If your employer doesn’t offer salary sacrifice, or you choose not to use it, your regular pension contributions may get tax relief, up to certain limits, and you pay NI on them.
The State Pension is going up
The government will keep the triple lock. This means the State Pension will rise by 4.8% from April 2026. This is to help make sure the State Pension keeps up with the cost of living.
- The full new State Pension will go up from £230.25 to £241.30 a week. The new State Pension is for people who reached State Pension age (SPA) on or after 6 April 2016.
- The full old State Pension will go up from £176.45 to £184.90 a week. The old State Pension is for people who reached SPA before 6 April 2016.
The government uses the triple lock to decide how much the State Pension goes up each year. You can read more about the triple lock and what it means at Money Helper, and about the State Pension at Gov.uk.
No change to the 25% tax-free cash lump sum
You may still take up to 25% (but no more than £268,275) of your pension as a tax-free lump sum when you retire. In this years’ Autumn Budget, no changes were made.
The Lump Sum Allowance (LSA) is the maximum you can take as a tax-free lump sum when you take your pension benefits. You may be able to take up to 25% of your pension benefits as a lump sum, tax free. This is up to a maximum of £268,275 (unless you have a higher protected amount).
Income tax thresholds frozen until 2030/31
The personal allowance, higher rate and additional rate thresholds for income tax have been frozen until the 2030/31 tax year.
- The personal allowance is frozen at £12,570
- Higher rate is frozen at £50,270
- Additional rate is frozen at £125,140
This means you pay tax on income above these amounts, including any pension you get. You can learn more about income tax rates and personal allowances at Gov.uk.
Inheritance tax on unused pensions and death benefits
From April 2027, unused pension funds and some death benefits may be subject to inheritance tax.
Personal representatives will be able to ask pension administrators to hold back 50% of taxable benefits. The money can be held for up to 15 months to pay inheritance tax.
A personal representative is the person legally responsible for handling someone’s estate after their death.
The inheritance tax policy does not apply to death-in-service lump sum payments or to pension benefits which may be paid to dependants.
Matt Riley
Manager
Matt joined Zedra Governance Limited (formerly PTL) in January 2008 having previously worked for Mercer Limited, Hazell Carr and Prudential.
As a Manager for the company's Birmingham Office, Matt’s responsibilities include working closely with Client Directors and individually liaising with Employers, Trustees and Members to ensure the smooth running of their pension schemes. Matt’s current portfolio of clients covers ongoing, paid-up and winding-up schemes. In addition, Matt has experience of schemes that have transferred or are in the process of transferring to the Pension Protection Fund and Financial Assistance Scheme. Matt also works closely with clients in relation to risk registers and internal controls.
Matt particularly enjoys resolving issues in a fair and pragmatic way ensuring that the right result is reached for the member or employer.
Sam Burden
Client Director
Sam Burden joined Zedra Governance (formerly PTL) in 2022. He is an Accredited Professional Pension Trustee (AMAPPT) and an Associate of the Pensions Management Institute (APMI)
Sam has more than 25 years’ experience in the pensions industry gained with WTW, KPMG, and Standard Life working with a wide range of pension schemes and sponsoring employers. His trustee appointments include DB, DC and hybrid pension schemes and he has experience of handling a broad range of projects relating to the management of pension schemes.
Beyond his pensions experience Sam is a former Birmingham City Councillor where he chaired the audit committee and a current charity trustee.
Payam Kazemian
Client Director
Payam Kazemian joined Zedra Governance Limited (formerly PTL Governance Limited) in 2021. He is an Accredited Professional Pension Trustee (AMAPPT) and an Associate of the Pensions Management Institute (APMI).
Payam has more than 17 years of experience in the pensions industry. Through his current role as a professional trustee, as well as previously as a pension’s de-risking and investment structuring expert at financial institutions including Goldman Sachs and Deutsche Bank, he has had overall responsibility for creating investment, de-risking, journey planning, and governance solutions for a wide range of UK DB pension schemes. He currently holds a number of board positions (as Chair of Trustees) and sole trustee in his professional trustee capacity. Payam has been involved with a number of pensions projects including pensions buy-in, pensions buy-out, GMP equalisation, investment strategy reviews, and dialogue with the pensions regulator. Payam looks to create and believes in a collaborative relationship between the sponsor, the trustee, and all other parties involved as this results in best member outcomes and helps deliver pragmatic solutions for scheme. Aside from his pensions experience, Payam holds a Ph.D. in Materials Science from the University of Cambridge.