8 December 2025
In the Budget on 26 November, the chancellor, Rachel Reeves, announced a cap on the amount of National Insurance (NI) savings that can be made when people pay their pension contributions using salary sacrifice.
Many companies, including Roche, offer pension salary sacrifice as a way of reducing the cost of saving into a pension scheme, but from April 2029 these NI savings will be limited to the first £2,000 of pension contributions. Salary-sacrificed pension contributions above £2,000 will be treated as ordinary employee pension contributions and therefore subject to both employee and employer NI.
However, tax relief on pension contributions is unchanged, so paying into a pension remains a tax-efficient way of saving for retirement.
The chancellor also confirmed that State pensioners will receive an above-inflation increase next year, bringing the new State pension up to £12,547 – within touching distance of the personal allowance of £12,570. Income above the personal allowance is taxable. Pensioners whose sole income is the basic or new State pension will be exempt from paying the small amounts of tax that are due, but details of how this will be managed have yet to be announced.
Finally, from 6 April 2026, the government will also close a loophole that allows people living overseas to make cheaper Class 2 voluntary NI contributions (VNICs) to top up their State pension. They will only be able to make more expensive Class 3 VNICs and only if they lived in the UK for at least 10 years (up from three at present).