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What’s going on in the pensions world?

Keep up to date with the latest pensions news and developments in the Scheme.

New limits for salary sacrifice and pension saving

From April 2029, if you pay more than £2,000 a year into your pension using salary sacrifice, you and your employer will have to pay National Insurance (NI) on the extra amount.

If you save less than £2,000 a year using salary sacrifice, this change will not affect you.

What is salary sacrifice?

Salary sacrifice is an arrangement between you and your employer. If your employer offers salary sacrifice, you can give up part of your pay, and your employer pays this amount into your pension.

Salary sacrifice can help to reduce the amount of income tax and NI you pay on your earnings. Your employer may also pay less NI. You might see it called either ‘salary sacrifice’ or ‘SMART’.

If your employer offers it and you’re a defined benefit member of the Scheme, you can also use salary sacrifice to pay into BRASS or AVC Extra.

If your employer doesn’t offer salary sacrifice, or you choose not to use it, your regular pension contributions may get tax relief, up to certain limits, and you pay NI on them.

The State Pension is going up

The government will keep the triple lock. It means the State Pension will rise by 4.8% from April 2026. This is to help make sure the State Pension keeps up with the cost of living.

• The full new State Pension will go up from £230.25 to £241.30 a week. The new State Pension is for people who reached State Pension age (SPA) on or after 6 April 2016.
  
  
• The full old State Pension will go up from £176.45 to £184.90 a week. The old State Pension is for people who reached SPA before 6 April 2016.
  

The government uses the triple lock to decide how much the State Pension goes up each year. You can read more about the triple lock and what it means at Money Helper, and about the State Pension at Gov.uk.

No change to the 25% tax-free cash lump sum

You may still take up to 25% (but no more than £268,275) of your pension as a tax-free lump sum when you retire. In this years’ Autumn Budget, no changes were made.

The Lump Sum Allowance (LSA) is the maximum you can take as a tax-free lump sum when you take your Railways Pension Scheme pension benefits. You may be able to take up to 25% of your pension benefits as a lump sum, tax free. This is up to a maximum of £268,275 (unless you have a higher protected amount). You can learn more in the Lump Sum Allowances Read as You Need guide.

Income tax thresholds frozen until 2030/31

The personal allowance, higher rate and additional rate thresholds for income tax have been frozen until the 2030/31 tax year.

• The personal allowance is frozen at £12,570
• Higher rate is frozen at £50,270
• Additional rate is frozen at £125,140
  

This means you pay tax on income above these amounts, including any pension you get. You can learn more about income tax rates and personal allowances at Gov.uk.

Inheritance tax on unused pensions and death benefits

From April 2027, unused pension funds and some death benefits may subject to inheritance tax.

Personal representatives will be able to ask pension administrators to hold back 50% of taxable benefits. The money can be held for up to 15 months to pay inheritance tax.

A personal representative is the person legally responsible for handling someone’s estate after their death.

The inheritance tax policy does not apply to death-in-service lump sum payments or to pension benefits which may be paid to dependants.