Jessica O'ConnorEmployers and pension savers are bracing for potential changes to pension tax incentives as the Chancellor prepares to deliver the Autumn Budget on 26th November.
According to reports from Penfold Pensions, elements of pension tax relief, salary sacrifice schemes and the long-standing 25% tax-free lump sum could be reviewed as part of a broader effort to close a £22bn funding gap.
With income tax, VAT and National Insurance (NI) rises ruled out, pensions have come into focus as a “technical” area where adjustments could raise revenue without altering headline tax rates.
Penfold said the speculation is creating uncertainty for workers planning retirement and for employers managing workplace pension schemes.
One option reportedly under consideration is limiting employer NI savings on salary sacrifice pension contributions.
Currently, the arrangement allows both employers and employees to reduce NI bills while increasing pension saving.
Changing the rules could raise up to £17bn for the Treasury, but would reduce incentives for businesses to offer the benefit and could increase employment costs.
Another area being discussed is pension tax relief. Currently, contributions receive relief at an individual’s marginal tax rate.
Analysts suggest a flat rate of around 30% could be introduced, benefiting basic-rate taxpayers but reducing relief for higher earners.
The long-established option to take 25% of a pension pot tax-free may also be reviewed, though no official proposals have been confirmed.
There is also speculation that the pension lifetime allowance, abolished in 2023, could return, which would affect long-term savers with larger pension pots.
Chris Eastwood, CEO and co-founder of Penfold, said: “Tinkering with pension benefits might offer a short-term fix for the Treasury, but it risks long-term harm to people’s financial futures.
“Pension tax relief and incentives are essential to help people across the UK retire with confidence and security.”
Eastwood added: “We are urging for calm and for clarity. We understand that this kind of speculation can feel unsettling, especially when retirement plans are at stake.
“At Penfold, we’re keeping a close eye on the Autumn Budget and will guide our customers through any confirmed changes with clear, practical support.”
