Millions of workers across the UK face a potential threat to their retirement plans as Chancellor Rachel Reeves considers significant changes to salary sacrifice schemes. The proposed restrictions, expected to be outlined in the Autumn Budget, could directly limit the amount households can save into their pensions each year.
Budget Plans Target Pensions and Green Travel
The Chancellor is preparing to deliver the Autumn Budget on November 26, where she will detail the Labour Party's strategy to address a £20 billion black hole in the government's finances. According to government sources, a central proposal involves imposing a cap on pension contributions made through salary sacrifice arrangements.
In a parallel move, the government is also planning cuts to the popular cycle-to-work scheme. This would restrict spending on bicycles purchased through the tax-advantaged programme. A Government source told the Financial Times: "Cycle to work should be about helping ordinary commuters switch to greener travel, not giving tax breaks to high earners buying £4,000 e-bikes for weekend rides in the Surrey Hills."
Industry Experts Voice Grave Concerns
The Association of British Insurers (ABI) has issued a stark warning, stating that capping pension contributions would have a deeply negative impact on people's long-term savings and retirement security.
Yvonne Braun, director of policy for long-term savings at the ABI, said: "The constant speculation about changes to pensions tax is eroding trust in the pensions system and risks making a bad situation worse."
Lily Megson-Harvey, policy director at My Pension Expert, added that this is a moment for the government to show leadership on long-term financial wellbeing. She urged authorities to "protect existing schemes, and invest in education, support, and incentives that help more people take control of their financial futures."
The Wider Fiscal Challenge
The speculation on tax targets comes as economists warn that the Chancellor needs to raise between £35 billion and £45 billion by 2029-30. Maxime Darmet, Senior Economist at Allianz Trade, noted the delicate balancing act of achieving a balanced current budget without harming GDP growth, raising inflation, or unsettling financial markets.
He suggested that major spending cuts were unlikely for both practical and political reasons, especially after Reeves was forced into a policy U-turn on social benefit cuts earlier this year. With the Chancellor promising 'no return to austerity', it appears that tax increases will carry the weight of fiscal consolidation.
