On Wednesday 26 November, the Chancellor delivered the Budget statement to Parliament. Read on to see how the announcements affect rail and pensions. For analysis from Railpen, head to the end.

Salary sacrifice

Salary sacrifice schemes can be a tax-efficient option for employers to provide member benefits and for individuals to save for their pensions. Employees receive better take home pay, but not at the expense of their futures, while employers pay less in national insurance contributions and can then choose to reinvest those savings – potentially by increasing their pension contributions.

From 6 April 2029, salary sacrifice pension contributions above £2,000 will be treated as ordinary employee pension contributions and be subject to employer and employee NICs. (Ordinary employer contributions remain exempt from NICs.)

The OBR estimates that this measure will raise £4.7bn in 2029/30 and £2.6bn in 2030/31.

These changes will be legislated for through primary and secondary legislation which will be introduced in due course and will take effect from 6 April 2029.

Tax issues

Despite speculation, there are no changes to the tax-free lump sum, with the 25% tax-free pension lump sum withdrawal limit remaining in place at £268,275.

Income tax relief on all contributions made by individuals remain in place, and tax on the income and gains from most pension scheme investments remain untaxable.

Further to the Autumn 2024 announcements and subsequent consultations, unused pension funds and certain death benefits will fall into scope for inheritance tax (IHT) from 6 April 2027. The Budget confirms that personal representatives (PRs) will be able to direct pension scheme administrators to withhold 50% of taxable benefits for up to 15 months and pay IHT on their behalf in certain circumstances. Further guidance around the practicalities of IHT reporting must be published in sufficient time before the new laws are implemented in 2027.

Indexation of pre-1997 benefits

From January 2027, the Government will introduce increases linked to the Consumer Price Index (CPI) on pre-1997 pension accruals in the Pension Protection Fund (PPF) and the Financial Assurance Scheme where their original schemes provided this benefit. Any increases will be capped at 2.5% a year.

This will ensure that people whose pension schemes became insolvent through no fault of their own no longer lose out due to inflation.

Elimination of Stamp Duty on newly listed shares

The Treasury will give new London stock exchange listings a Stamp Duty holiday, as Government seeks to address concerns about the declining competitiveness of the UK’s public markets.

Under the measure, which will apply for three years following a flotation and take effect from November 2025, investors will be exempt from the 0.5% tax on buying shares of newly listed companies in the UK.

Planning reform

The Chancellor has announced an extra £48 million to recruit 350 new planners as part of the Government’s aim to “get Britain building”.

This funding will look to increase the number of graduate planners and launch a Planning Careers Hub to support retention and open new routes into the profession.

Rail fare freeze

Rail fares in England will be frozen from March 2026.The first freeze in thirty years aims to drive down the cost of living and boost economic growth through limiting inflation by keeping travel costs down.

Railpen analysis

From a broad perspective, we were pleased to see that the rumoured changes to the tax-free lump sum were unfounded.

That said, the changes to salary sacrifice remain an area of close focus for us, as it could possibly see an unintended consequence of putting people off from saving into their retirement funds. Pensions are already a complicated area, and changes like we saw to salary sacrifice increase the complexity and can make them even harder to understand, while creating a real risk of misinformation forming that could disincentivise savers.

This is at a time when pensions adequacy is already one of the most pressing challenges facing our society. Too many people are not saving enough for retirement. Too many are not saving at all. And too many feel overwhelmed by a system that is difficult to navigate.

If the UK is serious about closing the adequacy gap, then stability, clarity, and incentives for pension saving must remain at the heart of government thinking.

These individual behaviours could play out at a broader, fund level. Reduced contributions could put pressure on the investment performance of pension scheme assets, which in turn could impact retirement outcomes.

Reducing incentives to savers could exacerbate the adequacy crisis. It risks undermining individual long-term financial resilience at precisely the time we should be strengthening it.

Led by the Trustee, Railpen will continue to advocate for the Scheme and its members in these areas and more.

Supporting member understanding

To ensure members are aware of the changes introduced by the Autumn Budget, and how these changes could impact their pension, we’ll be publishing a series of helpful communications over the coming weeks and months.

More information

For more information about the changes, and to discuss what they could mean for you and your Scheme, email the Client Relationship Management team.