NOTE TO PRESS: Salary sacrifice changes endanger pension saving, says Hughes Price Walker

26 November 2025

Hughes Price Walker is a leading independent specialist provider of actuarial, consultancy, investment and administration services.

Chancellor caps salary sacrifice NI savings on pension contributions above £2,000 from April 2029

Today’s earlier than expected release of the OBR report into the Budget confirmed that National Insurance advantages on salary sacrifice pension contributions will be scrapped above £2,000 a year will increase costs for both employees and employers who use this structure to boost retirement saving.

Hughes Price Walker warns the move may weaken incentives to save for the long term.

Ray Hughes, Consulting Actuary at Hughes Price Walker said: “This change is effectively a tax on responsible savers. It will reduce take-home pay for many higher earners and increase payroll costs for businesses.  It risks sending exactly the wrong message at a time when most people are already under-saving for retirement.  Furthermore, if behaviour changes by employers offering lower salary increases in exchange for additional employer pension contributions, it may not have the desired additional tax take the Treasury expects.”

The Chancellor also announced that:

  • People only in receipt of the basic or the new state pension will not have to pay small amounts of tax through Simple Assessment from April 2027;
  • CPI-linked increases, capped at 2.5% in any year, will be introduced from 1 January 2027 on PPF and FAS pensions built up before 6 April 1997 where members’ former schemes provided it;
  • The government will transfer the Investment Reserve Fund in the British Coal Staff Superannuation Scheme to the scheme’s Trustees. This will be paid out as an additional pension to members of the scheme; and
  • Access to pay voluntary NI contributions to boost the state pension scheme for overseas people will be restricted from 6 April 2026 in certain circumstances.

Hannah Magrill, Transaction Actuary at Hughes Price Walker said: Given the large surplus in the PPF, increases on pre 1997 pensions is generally welcome.  However, the changes will need to be carefully implemented, including consideration of how this benefit increase would be funded by remaining pension schemes and their sponsoring employers if the PPF funding position was to deteriorate in the future.

-ENDS-