The Chancellor’s Budget contained a number of measures with direct implications for pension schemes, trustees, and savers. Below is a summary of the most relevant announcements: 

• Salary sacrifice NIC relief capped – From April 2029, National Insurance advantages will be limited to the first £2,000 of salary sacrificed into pensions. While the mechanism remains in place, this change is expected to raise £7.4bn in its first two years. With an estimated 7.7 million savers currently using salary sacrifice, the impact will be widely felt. 

• PPF and FAS compensation uplift – From January 2027, pre-1997 pensions in the Pension Protection Fund and Financial Assistance Scheme will receive CPI-linked increases capped at 2.5% pa, aligning them more closely with post-1997 benefits. 

• DB surplus access for members – From April 2027, members over minimum pension age may benefit directly from scheme surpluses, subject to trustee discretion and scheme rules. 

• State Pension uprating – A 4.8% increase will apply from April 2026, with further legislation planned to ensure pensioners whose sole income is the State Pension are not drawn into income tax from 2027–28. 

• Frozen tax thresholds – Income tax and NIC thresholds will remain frozen until 2031/32, extending the effects of fiscal drag. 

• Minimum wage increases – From April 2026, higher rates will boost contributions for lower earners, though schemes must ensure salary sacrifice does not breach minimum pay requirements. 

Other Budget Announcements (at a glance): 

• ISA reform – From April 2027, the £20,000 annual allowance stays, but £8,000 must go into investments rather than cash. Over65s can still put the full amount into cash. A consultation in early 2026 will explore a simpler ISA for firsttime buyers, replacing the Lifetime ISA. 

• Class 2 NICs abroad – Voluntary Class 2 NICs will be withdrawn for individuals living overseas, preventing them from using this route to build entitlement to the UK State Pension. 

The PMI’s Response 

In our media statement, the PMI acknowledged fiscal pressures and the need to find savings but raised concerns about incremental pension tax changes undermining saver confidence. We emphasised the need for long-term stability and clarity, urging government to provide transitional guidance and allow the Pensions Commission to set a strategic direction. As highlighted, limiting salary sacrifice relief risks discouraging contributions at a time when undersaving is already a systemic challenge. 

Member Engagement 

We explored these issues further in our Budget 2025 webinar [insert link], providing analysis of the implications for schemes, trustees, and savers. Members are encouraged to review the recording for deeper insight. 

We will be engaging actively with HMRC and DWP as they develop the detail and implementation plans for these proposals and will keep members updated on developments.  

In summary: While some measures – such as PPF uplifts and DB surplus access – are positive, others, notably the salary sacrifice cap and extended tax threshold freezes, risk adding complexity and reducing confidence. The PMI continues to advocate for a coherent, long-term pensions framework that supports sustainable saving and investment. 

Watch the webinar here.