Media statement – Budget 2025

The PMI has released the below statement in response to the Government’s 2025 Budget.

The PMI recognises that difficult decisions have to be made to tackle current fiscal challenges, and acknowledges that capping tax relief on salary sacrifice pension contributions will lead to savings.

However, the industry's leading professional body shares concerns that pre-Budget speculation and incremental tweaks are damaging to saver confidence, and that changes to salary sacrifice will have negative consequences for savers.

The PMI has set out the steps it believes are now needed to ensure today’s changes can be implemented with minimal disruption.

Helen Forrest Hall, Chief Strategy Officer at the Pensions Management Institute, said:

“Pre-Budget speculation has been unhelpful while incremental tweaks to pensions tax to plug fiscal holes looks like short-termism. The industry has consistently called for long-term pensions policy free from political cycles, yet this plea has been ignored by successive governments.

“With a Pensions Commission reviewing these issues in the round, piecemeal changes risk undermining confidence and creating unnecessary complexity. What we need is an attractive and sustainable framework to reverse material undersaving and create stability. If we can get the long-term strategic direction right, we will create larger contribution flows and opportunities for long term investment, including in UK private markets."

Salary sacrifice

The PMI understands the need to address fiscal pressures. Capping salary sacrifice relief will deliver savings but will also have a real impact on employers, and the millions of employees that use it.

Helen Forrest Hall added: “Limiting this relief will make saving more expensive and could discourage contributions beyond the minimum at a time when the UK already faces a retirement savings gap yet wants to encourage schemes to invest in the UK.

“We are pleased that the positive fundamentals of the system remain – salary sacrifice isn’t completely abolished and tax-free cash is still available – but we now call on government to provide clear guidance and transitional support so that employers and their staff do not make any knee-jerk decisions, and let the Pensions Commission do its job.”

In light of the changes to salary sacrifice, the PMI is calling for:

Clear guidance and transitional arrangements to avoid disruption for employers and savers

Urgent detail on implementation – administrators need time to adapt payroll and pension systems.

Clarification on scheme types – how will non-contributory schemes be treated versus salary sacrifice arrangements?

Impact assessment on higher earners – particularly those in the £100k–£125k band who use salary sacrifice to avoid the 60% tax trap.

Note to editors:

HMRC analysis of the Annual Survey of Hours and Earnings suggests that around 7.7 million employees made salary sacrifice pension contributions in 2024. Written questions and answers - Written questions, answers and statements - UK Parliament

The Pensions Management Institute (PMI) is the UK’s leading professional body for those working in pensions and retirement savings. With over 8,500 members, the PMI represents the broadest range of pensions professionals and trustees in the country. Its members are responsible for managing and advising some of the world’s largest pension schemes, making key decisions on substantial financial matters.

Press contact:

For media enquiries, please contact Matt Adams, Head of Media and PR at pressoffice@pensions-pmi.org.uk