There were no changes made to the limit of tax-free pension commencement lump sums. This remains at £268,275 unless some form of protection is in place.
The pensions Annual Allowance remains unchanged at £60,000.
The tapering threshold remains at £200,000.
Salary Sacrifice Arrangements for Defined Contribution Pension Schemes
From 6 April 2029, only the first £2,000 of employee pension contributions will qualify for National Insurance contribution exemption under salary sacrifice arrangements. Contributions paid via salary sacrifice arrangements will still be exempt from Income Tax (subject to the Annual Allowance). The details of how this will operate will be announced before April 2029. In practice, this means that employee pension contributions of more than £2,000 through salary sacrifice will be subject to employer and employee NICs like any other workplace pension contributions. This will raise an extra £4.7 billion a year for the government.
State Pension Announcements
The government announced that from April 2026 the basic and new State Pension will be increased by 4.8%, in line with earnings growth. The Pension Credit Standard Minimum Guarantee will also be uprated by 4.8% from April 2026.
The government plans to ease the administrative burden for pensioners whose sole income is the basic or new State Pension by ensuring that they do not have to pay small amounts of tax via Simple Assessment if the new or basic State Pension exceeds the Personal Allowance from April 2027. The government is exploring the best way to achieve this and will set out more detail next year. Once we know more, we will provide an update on how this will operate.
