Autumn Budget 2025 - What It Could Mean for Your Pension

Autumn Budget 2025 - Key Details

  • Core pension rules remain unchanged: The government has kept the main pension framework stable. The Annual Allowance stays at £60,000. Pension tax relief is unchanged. The 25 percent tax-free lump sum remains available, capped at £268,275. There is no return of the Lifetime Allowance.
  • Salary-sacrifice pension contributions capped from 2029: From April 2029, only the first £2,000 per year of salary-sacrifice pension contributions will qualify for NI savings. Any amount above this cap will face both employer and employee NI, which will reduce the benefit of higher salary-sacrifice contributions.
  • Pensions brought into scope of Inheritance Tax from 2027: The government is proceeding with plans to include most pension pots within Inheritance Tax from April 2027. This change positions pensions as an active part of long-term estate planning for many clients.
  • State Pension maintained under the triple lock: The Chancellor has confirmed ongoing support for the triple lock. The State Pension will rise by 4.8 percent from April 2026. This is expected to offer meaningful increases for future retirees.
  • Tighter rules on overseas access to Class 2 NI for State Pension entitlement: The government plans to restrict access to cheap Class 2 National Insurance for individuals living overseas with limited UK links. This measure will make it harder for those outside the UK to build State Pension entitlement through low-cost contributions.

Focused Commentary from Morgan Lloyd Technical Director, John Dowding

After months of speculation, the 2025 Budget has confirmed that the core pension rules remain unchanged. Tax-free cash is safe, pension tax relief untouched, and there’s no return of the lifetime allowance. For many savers, this stability will be welcome news.

However, one confirmed measure will require attention: a cap on salary-sacrifice pension contributions. From April 2029, only the first £2,000 per annum of salary-sacrifice contributions will be exempt from National Insurance. Contributions above this threshold will attract both employee and employer NI, reducing the appeal of this strategy and increasing costs for businesses. This change is designed to limit the tax advantages of salary sacrifice while still allowing modest use of the arrangement.

The proposal to include pensions in Inheritance Tax from 2027 remains in place, as the Chancellor did not reverse it. While not a headline announcement today, it means that pension values will need to be considered in estate planning over the coming years.

Considerations for Our Clients

  • Salary-sacrifice arrangements - review how the £2,000 cap will affect net income and employer costs.
  • SIPP clients - most make personal contributions, so the cap has little direct impact—but check any employer-linked arrangements.
  • SSAS clients: While few use salary sacrifice, those that do should plan for higher NI costs.
  • Estate planning: Keep the 2027 IHT change in mind for long-term planning.

For pension savers and advisers, now is the time to take stock. These changes could influence contribution strategies and future tax efficiency. A proactive review of pension arrangements and estate plans will help ensure clients remain on track for their retirement goals.

At Morgan Lloyd, our focus remains on supporting advisers and clients with clear information and robust solutions as the regulatory landscape evolves.


John Dowding
Technical Director, Morgan Lloyd.

The information above is based on our understanding of the legislation applicable to UK Registered Pension Schemes, and HM Revenue & Customs rules. It is provided as a summary only and should not be taken as advice - Morgan Lloyd SIPP Services Ltd and Morgan Lloyd Administration Ltd are not authorised to give financial advice and will not be responsible for any decision or action taken as a result of relying on this information. If you are a retail client you should seek financial advice from a financial adviser who is authorised by the Financial Conduct Authority and/or seek guidance from the Government’s Pension Wise service.