Rachel Reeves announces changes to pensions in the Autumn Budget
Written by Ben Rodgerson on 27th November 2025
Rachel Reeves has announced the Autumn Budget for the UK including big changes to pensions.
The Chancellor’s plans for the economy have once again received mixed reviews.
She announced changes to pensions, which is often a talking point when the budgets are announced.
What changed or was confirmed for Pensions?
The Budget introduces a cap on “salary sacrifice”.
From April 2029, only the first £2,000 per year of salary sacrificed pension contribution will be exempt from National Insurance Contributions (NICs), with any amount above that being subjected to NICs.
According to the forecast from the Office for Budget Responsibility (OBR), their estimate is that £4.7 billion will be raised in 2029/30 and £2.6 billion in 2030/31 from the NICs.
People receiving the state pension will see a rise of 4.8% in April, matching average wage growth.
The new state pension (The post-2016 flat-rate pension) will increase to £241.30 a week from £230.25, while the older system (The pre-2016 basic pension) will rise to £184.90 having previously been £176.45.
What Pensioners and Savers should look out for:
Rachel Reeves has opted to freeze tax thresholds for another three years, which is often called a stealth tax. Unlike raising the headline rates, it is not obvious on your payslip.
This will hit you the hardest if your income is near one of the tax thresholds, with about a million people who currently don’t earn enough to pay income tax will be dragged into paying it soon as their earnings will rise above the £12,570 threshold.
This includes people living on the state pension, which is currently just under £12,000 a year but as of next year is set to rise close to the threshold.
What this all means for you
If you are a pensioner receiving the State Pension over the next few years you may end up paying tax on it depending on how thresholds are frozen.
If you are a working saver using a salary sacrifice pension scheme, large contributions will become less tax efficient after 2029. Therefore retirement savers may want to explore how much they contribute and whether other pension-saving routes make more sense.
