Rachel Reeves warned of pension Budget move that would cut take-home pay for ‘millions’ | Personal Finance | Finance
The Chancellor has been urged to refrain from making changes to pension contributions in the November Budget, saying it could cause Britons to lose millions.
Association of Retirement Professionals (SPP) has written to all Members of Parliament warning of the dangers of reducing or abolishing salary sacrifice arrangements for pension contributions. Salary sacrifice for a pension (also known as salary replacement) is a voluntary arrangement where an employee gives up part of their salary in exchange for their employer contributing an equivalent amount to their pension. Although they are funded by the employee, they are treated as employer pension contributions for income tax and National Insurance purposes. Research commissioned by HMRC has led to speculation that the Government may seek to make savings by eliminating or reforming salary sacrifice for pension contributions, a new SPP article has said. Such speculation has increased as the 26 November 2025 Budget approaches. Around a third of private sector workers benefit from salary sacrifice arrangements, and almost 10% of public sector workers do so.
The SPP stated that any change would bring revolt to large numbers of workers and that removing the regulation would cost “millions” of workers hundreds of pounds a year.
The SPP explained that while providing salary sacrifice arrangements would cost the Government £4bn (£1.2bn for employees and £2.9bn for employers), there was also “widespread recognition that this is a positive investment encouraging retirement saving”.
Research commissioned and published by HMRC showed that employers were generally highly supportive of regulation and believed any changes would cause confusion, reduce employee benefits and discourage retirement savings.
The research presented three potential scenarios for restricting salary sacrifice; Employers stated that employee morale would be negatively affected in all three scenarios.
Steve Hitchiner, Chairman of SPP Tax Group, said: “Changing salary sacrifice regulations will lead to a reduction in take-home pay for millions of workers saving for retirement at work, with the biggest impact on those earning less than £50,284 a year.
“Despite the Chancellor’s public commitment against this, this would also mean another major cost for employers and undermine the critical role employers play in supporting and promoting quality retirement savings vehicles.”
