The Chancellor has kept the main pension allowances unchanged but has confirmed a new cap on salary sacrifice arrangements that will apply from April 2029.
There had been heated speculation that the Chancellor would change the pension rules to help the government raise taxes, but no changes were announced to the annual allowance (which remains at £60,000) or to the carry-forward rules which can use up previous year’s annual allowances. The lump sum allowance has also remained unchanged at £268,275.
However, the Chancellor announced changes to the salary sacrifice arrangements for pension contributions. Salary sacrifice allows employees to reduce part of their salary or bonus in exchange for pension contributions, which is tax-efficient and helps save for retirement. However, this arrangement has disproportionately benefited higher earners with salary sacrifice costs expected to rise from £2.8 billion in 2016-17 to £8 billion by 2030-31.
From April 2029, the government plans to introduce a cap on salary sacrifice contributions which will limit the amount that can be sacrificed without incurring National Insurance Contributions (NICs) to £2,000 per employee. Salary sacrifice contributions above this amount will be subject to employer and employee NICs. Pension contributions that are not part of a salary sacrifice will remain unchanged.
The Chancellor reaffirmed the government's commitment to maintaining the Triple Lock on the State Pension throughout this parliament. This means that in April 2026, the State Pension will increase by 4.8%. The Triple Lock ensures that the State Pension rises by the highest of three measures: inflation, wage growth, or 2.5%, helping to protect pensioners' income against rising costs of living.
Also, starting from 6 April 2027, the government will close a loophole that allows individuals to use pensions for inheritance tax (IHT) planning. Under the new rules, any unspent pension pots will be brought within the scope of IHT.
Your State Pension forecast shows how much you could receive, when you can claim it, and how to boost it by filling National Insurance gaps.
The Check Your State Pension forecast service provides a way to understand your State Pension entitlement. This is a joint service organised by HMRC and the Department for Work and Pensions (DWP) and is available to most individuals under State Pension age.
The forecast allows users to see:
The service also helps identify any shortfalls in National Insurance Contributions (NICs), enabling users to take action now to enhance future pension benefits.
To access the service, go to www.gov.uk/check-state-pension and sign in securely using your Government Gateway credentials. If you don’t have an account, you can easily create one. You may need to verify your identity using a photo ID, such as a passport or driving licence.
For added convenience, you can also check your pension forecast via the HMRC app, providing secure access on the go.
If you are already receiving or have deferred your State Pension, you’ll need to reach out to The Pension Service (UK) or the International Pension Centre (abroad). Regularly checking your State Pension status is important to help maximise your entitlement and to help assess any additional savings or pensions you may need for a comfortable retirement.
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