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Here’s what you need to know about how it could affect your pension.

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 amount above £2,000.

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 with your employer that lets you give up part of your salary, which your employer then pays into your pension. This can reduce the amount of income tax and NI you pay, and 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 pension contributions will stillget tax relief, up to certain limits, but you’ll 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 can still take up to 25% of your pension (up to £268,275) as a tax-free lump sum when you retire.
This year’s Autumn Budget made no changes to this rule.

The Lump Sum Allowance (LSA) is the maximum you can take tax-free when you access your Railways Pension Scheme benefits. If you have a higher protected amount, you may be able to take more.
Find out more: moneyhelper.org.uk/en/pensions-and-retirement/tax-and-pensions/lump-sum-allowances-for-pensions

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.