Pensions updates | September 2025

Employers seeing the writing on the wall for pensions salary sacrifice schemes

According to a recent survey by accountants BDO, nine out of ten employers expect the government to ditch tax breaks on pension salary-sacrifice arrangements when it unveils its Autumn budget. The survey, published on 11 September 2025, finds that businesses are braced for a major upheaval when the government announces a raft of fiscal policies in the budget statement to Parliament, which is scheduled for 26 November 2025. Speculation has been mounting in the pensions sector that the government could remove the National Insurance (NI) tax exemption on salary-sacrifice plans for both employers and employees. BDO commissioned polling company Censuswide to quiz 505 C-suite executives in midmarket businesses in August 2025 on their expectations about the changes. It found that 49% believed restrictions on salary-sacrifice plans were quite likely, while 45% believed they were very likely. Just 6% said the decision could go either way.

The standard tax rules stipulate that pension contributions by employees are exempt from income tax, but are still chargeable under NI. Salary sacrifice enables employers to offer an alternative approach where employees agree to sacrifice a portion of their salary and their employer pays the money on their behalf into their retirement savings plan. Both the employer and the employee are then exempt from NI on those contributions. The government estimates that salary-sacrifice arrangements are used in approximately 30% of private sector and 9% of public sector pensions.

HMRC announced in May 2025 that it was concerned about unequal tax treatments between companies that offered these arrangements and those that did not. It sought to gauge the attitudes of employers to several ‘hypothetical’ scenarios, including cutting the NI exemption. The response from businesses was broadly negative, HMRC confirmed. The total bill for lost tax revenue from salary-sacrifice arrangements is not clear. However, the cost of NI tax relief from contributions to, and benefits from, pension plans reached £23.5bn in the financial year from April 2023 to April 2024, according to HMRC data. HMRC has previously said that talk of cutting tax breaks on salary-sacrifice arrangements were ‘totally speculative’.

Pensions tax relief at risk

Still on the topic of the Autumn Budget 2025, Lane Clark & Peacock LLP (LCP) has cautioned that potential changes to pension tax relief in the upcoming budget could pose significant political and economic risks. Speculation suggests the Labour government may consider scrapping higher-rate tax relief or the 25% tax-free lump sum on pensions to raise revenue. However, LCP argues these measures could break manifesto promises, disproportionately affect workers—especially in the public sector—and place additional burdens on employers. Former Pensions Minister and LCP consultant Steve Webb warned that such reforms may appear attractive on the surface but could trigger backlash and deliver less revenue than expected due to the complexity of implementation.

Taking action on impersonation fraud

In a blog, the Pensions Regulator (TPR) has expressed concern about the increasingly sophisticated impersonation tactics which fraudsters are using to target savers and their pensions. Fraudsters are attempting to access members’ accounts by exploiting security vulnerabilities, hacking email accounts, and using any data they steal to contact the pension scheme and change the details of the beneficiary bank account. TPR are also concerned that fraudsters are impersonating organisations which savers may trust and rely on for help, such as the Financial Conduct Authority and the Fraud Compensation Fund. TPR are raising awareness by supporting Action Fraud’s pension fraud campaign, which aims to help savers spot the signs of pension fraud. TPR is also assisting the industry in tackling fraud by issuing warning alerts to the pensions industry in collaboration with City of London police, keeping schemes aware of threats.

Trustees and administrators must also take action to protect their members from fraud. TPR urges trustees and administrators to:

• Tighten security by reviewing and strengthening scheme security protocols around member verification and account access.
• Report suspicious activity to Action Fraud.
• Support Action Fraud’s campaign by sharing their social media posts and adding fraud warnings to member portals and annual benefit statements.

Trustees and administrators are also encouraged to provide members with the following advice:

• Secure their pension account by keeping their details up to date, using strong passwords, and adding two-step verification. They should also visit the Action Fraud website for more guidance on security.
• Stop, think and check who they are dealing with (including by checking the FCA register). They should reject unexpected contact about their pension, even if it seems to be from a trusted source, and they should not click on URLs, reply to an email, or use the contact details given.
• Do not make any rushed decisions, and contact MoneyHelper for free, impartial guidance. If they think they have been targeted by a scammer, they should report to Action Fraud. If they have made a payment, they should inform their pension provider to help prevent further loss.
• Visit the Stop! Think Fraud website for further information on how to protect themselves.