April is nearly upon us, and the pension changes announced in the Autumn Budget last year are set to come into effect for HR teams throughout the United Kingdom. But what preparations should you make before the new tax year begins on the 6th of April?
In the 2025 budget, Chancellor Rachel Reeves confirmed that the State Pension will increase by 4.8%, starting in April 2026. The move was shaped by the triple lock and earnings growth, bringing the full new rate to £241.30 per week, with the basic state pension rising to £184.90 per week.
In addition to this, the triple lock has been retained for this parliament, and Pension Credit will also be increased.
Another change that directly impacts UK businesses is the salary sacrifice cap, which will limit the amount of employee pension contributions made via salary sacrifice that remain exempt from National Insurance Contributions (NICs) to £2,000 per year.
However, the government opted to delay the implementation of the salary sacrifice cap until the 6th of April 2029, allowing more time for businesses to revise their pension schemes, adapt payroll software, and implement new compensation strategies.
While the amount of tax relief associated with workplace pensions is set to remain the same for the foreseeable future, the budget also introduced rule changes that included unused pension funds as part of a person’s estate for inheritance tax (IHT) purposes. This rule will be in effect for deaths that occur on or after the 6th of April 2027.
What Action Should HR Teams Take?
Given that a recent survey found that just 27% of 1,000 respondents understood what a salary sacrifice pension does, it’s important for HR teams up and down the country to not only be aware of the upcoming pension changes but also how they can adapt their processes to avoid disruption.
With many of the changes announced directly impacting the amount of money individuals can receive as part of their state pension payouts, workplace pensions aren’t heavily impacted by the announcements in the Autumn Budget.
However, the government has purposely delayed the implementation of its £2,000 salary sacrifice cap in a bid to allow businesses to keep on top of their new pension considerations.
For large companies with many employees using salary sacrifice schemes to boost their tax efficiency, the new rules are likely to mean major revisions. However, there are some useful resources to keep HR teams on top of what the changes actually mean when it comes to adapting NICs to the new cap.
By subscribing to the monthly HMRC Employer Bulletin updates, it’s far easier to become aware of fresh changes and ideas surrounding PAYE and National Insurance changes. Additionally, GOV.UK regularly publishes fresh guidance on salary sacrifice rules and recommendations.
Considerations for 2026/27
Although state pensions operate largely externally to workplace pension structures, salary sacrifice schemes can directly impact the amount of National Insurance payments made by employees. If these payments fall below a certain threshold, they may negatively impact the state pension entitlement of staff.
With this in mind, HR teams should increase not only the preparedness of the company but also the staff by clearly communicating the rules and implications of salary sacrifice initiatives.
This could be extremely important beginning in April 2026, because there may be an uptick in employees using salary sacrifice in the years before the £2,000 cap arrives. To prevent workers from losing out later on, remember to communicate the details of and implications of salary sacrifice.
Another important rule when approaching every new tax year is to connect with your pension provider to learn their interpretation of the changes and discover what forms of support they offer. Many providers are proficient at creating resources for both employers and employees.
Keep employees close to retirement age in mind. Depending on their NIC contributions and retirement expectations, their plans may have changed drastically. Offering access to guidance sessions, pension modelling tools, or directions to strong online resources could all make a big difference for planning ahead of the new tax year.
Additionally, don’t think that once the 6th of April passes, your job is over. Continue to monitor transitional arrangements and adjust your offerings accordingly based on their performance.
Supporting Your Workers
The most common source of concern for employees is money, and the priority of HR teams is to help workers who may be concerned about how the budget affects their pension access by offering financial wellbeing support on demand.
This doesn’t necessarily mean running weekly workshops to help those who have fears over their financial wellness, but it could involve making economic helplines more visible around the office or including portals to financial management platforms on your website or within your newsletter.
Whenever changes are announced in budgets, it can lead to increased anxiety among workers. By taking a people-focused approach, it’s possible to adapt faster to new legislation around pensions and help employees to overcome any money worries they may have when the new tax year comes around.
Guest writer
