Your pensions are often at the heart of your retirement saving plan. By contributing each month, and benefiting from employer contributions and tax relief, you can slowly build your pot. Then, when the time comes to finish working, you’ll rely on those savings to live out all your dreams in retirement.
As such, any changes to pension legislation could affect your ability to achieve your goals in the future.
Currently, there is much speculation about potential changes the government could make to private and workplace pensions, as well as the State Pension.
Read on to learn about three legislative changes the government could make, and how they might affect your retirement plan.
1. Changes to the triple lock or State Pension Age
You may draw much of your income from private or workplace pensions in retirement, but the State Pension is a useful supplement to your other savings.
Two key benefits of the State Pension are that the payments last for the rest of your life and the amount you receive increases each year due to the “triple lock”.
Under the triple lock, the full new State Pension amount increases by the higher of:
- The rate of inflation
- Average wage growth
- 2.5%.
However, as life expectancies increase and the number of people claiming the State Pension rises, the cost is becoming an issue for the government.
Indeed, the BBC reports that the annual cost of maintaining the triple lock is expected to be £15.5 billion by 2030 – three times higher than originally forecast.
As a result, there has been debate about whether the triple lock is sustainable, with two potential solutions being raised.
The first is to change the triple lock in some way so that the payments do not always increase as much. For example, in the lead up to the general election, the Green Party suggested a “double lock” which would mean the State Pension rose by the higher of inflation or wage increases but would remove the 2.5% minimum guaranteed increase.
Alternatively, if the government wants to maintain the triple lock, it might further increase the State Pension Age to reduce the number of people claiming the payments in the future.
The age at which you can claim your State Pension is already set to rise from 66 to 67 by 2028, and a further increase to 68 is expected from 2046.
However, according to the Independent, some pensions experts warn that this increase won’t be adequate, and the State Pension Age may need to rise as high as 80.
The government is yet to announce any concrete policies to do with the State Pension, but as the cost of maintaining the triple lock continues rising, there is a chance that the chancellor will make adjustments of some kind.
This could mean that the amount you receive or when you can access the payments might change in the future.
Consequently, it’s important to ensure that you have adequate funds in your private and workplace pensions so you can still afford your lifestyle, even if your State Pension payments are diminished in some way.
2. Reviewing the auto-enrolment rules
The government first introduced auto-enrolment starting in 2012. Under these rules, employers are legally obliged to enrol qualifying employees in a pension scheme and contribute to it.
To qualify for auto-enrolment, you must:
- Be at least 22 years old
- Earn at least £10,000 (or £833 a month, or £192 a week) before tax.
Normally, if you meet these criteria, you will make pension contributions on any income that exceeds your Lower Earnings Limit (LEL) of £6,240 in 2025/26.
The total pension contribution on qualifying earnings must be at least 8% – 5% from you and 3% from your employer. However, you and your employer can choose to contribute more.
Recent reviews of the pension landscape highlighted issues with savers not having adequate funds in their pensions at retirement. One way the government could address this problem is by changing the rules around auto-enrolment.
According to the Houses of Parliament library, the Pensions (Extension of Auto-Enrolment) Act 2023 gave the government the power to:
- Reduce the lower age for auto-enrolment
- Remove the lower earnings limit for auto-enrolment so you make contributions on your entire income.
If these changes come into effect, this could mean that you pay more into your workplace pension and may have a larger savings pot to draw on in retirement.
However, if you’re a business owner, the cost of employing people may increase.
3. Removing certain tax advantages of salary sacrifice
Your employer may offer a “salary sacrifice” scheme which allows you to exchange a portion of your earnings for certain benefits, including pension contributions.
If you pay your pension contributions through salary sacrifice, your earnings reduce by the amount you would normally put into your pension, and your employer makes the contribution directly.
Crucially, this means that your income is technically lower. As your Income Tax and National Insurance contributions (NICs) are calculated based on your earnings, you would pay less tax. This means that your take-home pay would be higher, while the amount going into your pension remains the same.
You might also decide to contribute the saving to your pension, so your monthly earnings remain the same while you build your retirement pot faster.
However, HMRC recently published research into potential changes to salary sacrifice. According to PensionsAge, the proposed changes included:
- Removing the NI exemption for employers and employees
- Removing the NI exemption for employers and employees, and the Income Tax reduction for employees
- Removing the NI exemption for employers and employees on any salary sacrificed above a £2,000 threshold.
The fact that the government has published this research in recent months suggests salary sacrifice rules could change in the future, potentially removing some of the tax incentives.
As such, if your employer offers salary sacrifice, you may want to take advantage of the scheme now before any changes come into effect.
We do not yet know whether the government will introduce these changes, or any other legislation relating to pensions in the future. Fortunately, with our support, you can continue building your retirement savings despite any new developments.
Get in touch
If you need help navigating any future changes to pension legislation, we can support you.
Please get in touch to find out how our team of VouchedFor Top Rated planners could help today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Workplace pensions are regulated by The Pension Regulator.
Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.