The Autumn Budget 2025: What It Means for Your Pension

The Autumn Budget 2025 didn’t rewrite the pension rulebook, but it did point a big arrow at what’s coming next – especially around salary sacrifice and the State Pension. So what does the Autumn Budget actually mean for your pension? Here’s the simple version.

Salary sacrifice NI relief gets a cap – but not until 2029

From 6 April 2029, the first £2,000 a year of pension contributions you make through salary sacrifice will continue to be free from both employee and employer National Insurance. Anything above that will work just like a normal pension contribution, with NI applied.

What stays the same:

• Salary sacrifice still works as a smart way to pay into your pension.
• All pension contributions, salary sacrifice or not, stay exempt from Income Tax (within the usual annual allowance).
• Employer pension contributions remain NIC-free.

So the system isn’t going away; it’s just getting a cap in the future.

Why is salary sacrifice changing?

The government says NI relief has grown sharply, and most of the benefit goes to higher earners making large contributions. The cap is designed to make things “fairer and more sustainable” – their words, but we’ll give credit for clarity.

The State Pension triple lock stays – with a 4.8% rise in April 2026

Good news whether you’re already drawing the State Pension or getting closer to it: the government has recommitted to the triple lock for this Parliament. That means the State Pension will rise each year by whichever is highest: earnings, inflation (CPI), or 2.5%.

In April 2026, the basic and new State Pension will go up by 4.8%, worth around £575 extra a year if you’re on the full new rate.

What didn’t change:

• No adjustment to State Pension age (for now).
• No change to how the triple lock works.

A new Pensions Commission + another State Pension age review

Here’s the longer-term bit. The government is setting up:

• a new Pensions Commission, and
• the third independent review of the State Pension age.

Nothing changes today, but these two actions signal something important: the future of the State Pension is very much on the table. Sustainability, fairness, and affordability are back in the spotlight.

If you’re early or mid-career, this matters – because your retirement timeline could shift in the coming decades. All the more reason to build a strong private pension early.

What didn’t change? (A lot, actually.)

Despite a big Budget overall, the private pension rules remain steady and predictable:

• Annual allowance: unchanged.
• Tax relief: unchanged.
• Auto-enrolment rules & minimums: unchanged.
• Pension access age and drawdown rules: unchanged.

Basically, your pension routine for the next few years: keep calm and contribute on.

Who’s impacted – and how

Employees using salary sacrifice

If you contribute more than £2,000 a year via salary sacrifice, the NI saving on the amount above £2,000 will disappear in 2029. Many people won’t notice a change if their auto-enrolment contributions sit below £2,000. Higher earners contributing larger amounts will see a smaller NI advantage than today.

Penfold takeaway: Keep using salary sacrifice. It’s still tax-efficient, still simple, and still a great way to build your pension. Just don’t assume the NI benefits scale forever after 2029..

Employers offering salary sacrifice

Employers will see employer NI apply to employee contributions above £2,000 from 2029. The first £2,000 stays NI-free as normal. Some employers may review how they structure contributions closer to the deadline. For most, salary sacrifice still offers meaningful savings and remains easy for employees to understand.

Penfold takeaway: No changes needed today – but finance and HR teams should start planning modelling and payroll tweaks well ahead of April 2029.

Current or soon-to-be pensioners

You get a 4.8% State Pension rise in 2026, and the triple lock remains in place. Private pensions remain untouched.

Penfold takeaway: You’ll see a boost to your State Pension in 2026, while your private pension options stay exactly as they are.

Younger and mid-career savers

The new Commission and State Pension age review mean one thing: the future State Pension may not look exactly like today’s version.

Penfold takeaway: Your own pension is your superpower. Every contribution gives you more control over your future, whatever happens in Westminster.

People abroad topping up NI

The Budget tightens the rules for voluntary NI contributions from overseas from April 2026.

Penfold takeaway: If you’re building your State Pension from abroad, double-check your eligibility now – not in 2026.

What to do now

• No need to stress about salary sacrifice – it still works: The NI cap only arrives in 2029. Until then, you get the full NI and Income Tax benefits as normal.
• Sense-check your contributions: If your retirement plan is leaning heavily on the State Pension, consider boosting your own contributions. Even small increases compound.
• Higher earner? Start planning early: The cap doesn’t make pensions “less worth it” – it just trims the NI boost for large contributions. Worth reviewing closer to 2029, but nothing urgent today.

The bottom line

For pensions, the Autumn Budget 2025 is a calm, mostly continuity-heavy update – with one meaningful change coming down the track for salary sacrifice and a renewed focus on what the State Pension should look like in the decades ahead.

For now? Nothing immediate to fix or rethink. Just keep contributing, stay informed, and give your future self a pension you’ll genuinely feel good about.