Pensions Bulletin 2025/45
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This edition: Treasury to cap NIC relief on employer contributions financed through salary sacrifice?, Government moves away from further limiting tax-free lump sums?, Box Clever members transfer, and more.
Treasury to cap NIC relief on employer contributions financed through salary sacrifice?
As we get closer to Budget Day it appears that one pensions tax measure the Chancellor is likely to take is to place a cap, for national insurance contribution (NIC) relief purposes, on employer contributions that are paid into registered pension schemes that have been financed as a result of members electing not to receive some of their salary. Such salary sacrifice schemes have a certain degree of popularity as pension contributions paid directly by members are made from salaries after NICs have been paid whilst employer pension contributions do not attract NICs. For high earners making substantial personal contributions, diverting them via their employer can give rise to significant NIC savings.
The capping idea was explored by HMRC in research conducted in 2023 involving three hypothetical changes to tax reliefs on such salary sacrifice. The results of this research was published in May 2025 (see Pensions Bulletin 2025/21). It now seems that capping (Scenario 3 in the research) is to be taken forward in the Budget with the same £2,000 threshold being mooted – any salary sacrificed above this threshold attracting employer and employee NICs as if such an excess had been paid as salary. It is being reported that the Treasury believes that this measure will raise up to £2bn pa.
In a timely intervention, the Society of Pension Professionals has published a paper that explores the impact of reducing or removing salary sacrifice arrangements for pensions. The report explains what salary sacrifice for pensions is, why it matters, how it is used and by whom, and what the implications would be if the Government were to impose restrictions or abolish this long-standing arrangement.
Comment
We do not normally report Budget rumours but this one (and the one below) seem well enough sourced to be credible, although the detail will remain unclear until Budget Day.
Salary sacrifice schemes encourage employers to offer good workplace pensions. This tax raid will almost certainly mean less going into pension savings, although if the cap is set at £2,000 pa, its impact is likely to only be felt by those on earnings of broadly £40,000 pa and above. That is unless employers operating salary sacrifice schemes decide to end them for all their employees either because of the additional administration, which will be quite onerous and have to be done in a rush, that capping will give rise to or because the reduction in employer NIC relief results in employers concluding that running these arrangements is not worth the candle.
As recently as July 2025 the Government set up the Pensions Commission to explore the barriers stopping people from saving enough for retirement (see Pensions Bulletin 2025/29). It’s hard to discern any logic to the Government creating another such barrier.
Government moves away from further limiting tax-free lump sums?
It is being reported that the Chancellor has decided not to cut the amount that can be taken as a tax-free lump sum from a registered pension scheme, which may help to quell earlier speculation that she was going to do just that, with some people seeking to pull out large tax-free lump sums from their pension savings before Budget Day as a result.
Comment
Although we will not know for certain whether this is the case until Budget Day, this was not going to be a money-raising action for the Government in the short term assuming that transitional protections were put in place.
Those thinking of taking their tax-free lump sum before Budget Day on the basis of rumours that there were to be further restrictions will face substantial obstacles if having taken their lump sum they wish to reverse the transaction as we have previously reported (see Pensions Bulletin 2025/44).
Box Clever members transfer
The Pensions Regulator has announced that all 2,800 members of the Box Clever Group Pension Scheme have transferred to the ITV Pension Scheme following action taken by the Pensions Regulator in one of its longest running cases. The bulk transfer was completed on 1 October 2025.
As a result, members of the scheme who have been receiving benefits at Pension Protection Fund (PPF) levels since 2014 will now receive full scheme benefits and back payments. This should mark the final chapter in this intervention case which started in 2011, but which relates to corporate actions taken in 2000.
The Pensions Regulator has published a regulatory intervention report detailing how it pursued ITV through the contested issuance of Financial Support Directions and then a Contribution Notice, to protect the benefits of thousands of members of the pension scheme.
Comment
This news follows the announcement of a settlement in July 2024 (see Pensions Bulletin 2024/29) and confirms that what had been agreed back then has been successfully implemented.
This is good news for the Box Clever members (although too late for some) and is particularly noteworthy for the lengthy litigation which, among many other things, showed that the courts will not lightly substitute their view for the Regulator’s when the latter’s regulatory actions are challenged by its targets.
The outcome is less good news for ITV. Its DB scheme which had a surplus of £182m on an accounting basis on 31 December 2024 will have to absorb a buy-out deficit of around £77m and ITV has agreed to provide additional funding to its scheme of £25m. An expensive business for them (although not as expensive as it would have been when financial conditions were less favourable) and a significant result for the Regulator.
State Pension Age increase – Government to retake decision on financial compensation for 1950s-born women
In a statement to the House of Commons on 11 November 2025 read out by Pat McFadden, Secretary of State for Work and Pensions, immediately following which there was a debate, Mr McFadden is to retake the decision made by his immediate predecessor, Liz Kendall, and announced on 17 December 2024, not to introduce a financial compensation scheme for 1950s-born women affected by the delay in sending individual letters informing them about the changes in the state pension age (see Pensions Bulletin 2024/49). This is because a 2007 DWP report, evaluating the effectiveness of automatic pension forecast letters, had not formed part of the materials she had before her to assist in reaching her decision.
Mr McFadden promised to begin the work immediately on retaking the decision in the light of this new evidence and he will update the House of Commons on the new decision as a conclusion is reached.
Comment
This extraordinary turn of events has resulted from judicial review proceedings instigated by campaigners challenging the December 2024 decision (see Pensions Bulletin 2025/23), which it would now appear to have led the Secretary of State to conclude that he needed to revisit the December 2024 decision because of a failure of due process. Although clearly of great embarrassment to the Government, this announcement is somewhat technical in nature and does not necessarily mean that when it retakes its decision, the upshot will be any different. Nevertheless, campaigners will take heart at this news.
MPs to examine the pre-pension income gap
The Work and Pensions Select Committee has launched an inquiry into the “pre-pension income gap” ahead of state pension age starting its climb from 66 to 67 over a two-year period starting in April 2026. The Committee is concerned that a number of those just short of state pension age are placed into poverty due to their having to leave work before this age to care for partners or on health grounds, pointing to when state pension age went up from 65 to 66 it led to 100,000 more 65-year-olds in absolute income poverty compared to before. Current 60-64 year-olds are the joint poorest age group among working-age adults aged 25 and over, with 22% of them (876,000 people) living in poverty in 2023/24.
The inquiry will examine the reasons for premature retirement, inequality, the impact on pre-pensioner and pensioner poverty of increasing the state pension age and what support to smooth the transition could look like. In a call for evidence that closes on 19 December 2025, the Committee asks 16 questions relating to this issue.
This inquiry comes alongside publication by the Committee of the Government’s response to the Committee’s report on Pensioner Poverty (see Pensions Bulletin 2025/30). In it the Government did not commit to an ageing society strategy as recommended by the Committee. Asked to produce an impact assessment for the incoming state pension age increase, it pointed to the most recent being published in 2013.
Comment
It will be interesting to see what the MPs come up with in relation to mitigating increases to state pension age. Not everyone can work through to their state pension age and for those who can’t and have little by way of retirement savings, they can be in poverty while they wait for their state pension to kick in.
MaPS to withdraw its Retirement Adviser Directory
The Money and Pensions Service has announced that it is to withdraw its Retirement Adviser Directory on 17 December 2025. Currently available via its Find a retirement adviser page, this free, impartial and non-commercial directory can assist those thinking of seeking independent financial advice in relation to their pension savings. In future, MaPS intends to signpost to a range of other sites.
Comment
This seems to be a backwards step and for pension schemes that currently point to this directory in their member communications, it means that a review will need to take place to see what signposting is appropriate in future. For more on this issue see LCP partner Steve Webb’s article in This is Money.
APPT updates its Sole Trustee Code of Practice
The Association of Professional Pension Trustees has announced that it has updated its Code of Practice for professional corporate sole trustees. The Code, first announced in October 2020 (see Pensions Bulletin 2020/44), has been updated to reflect changes to the Standards for Professional Trustees of Occupational Schemes (in particular Schedule 3 which set out additional standards for professional trustees who act as sole trustee), the APPT Change of Professional Pension Trustee Guidance Note, and the Regulator’s updated guidance and codes. The updated version will be effective from 1 January 2026, five years after the first version came into force.
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