Budget confirms salary sacrifice will be restricted but opens the door to true sharing of DB surplus

Budget confirms salary sacrifice will be restricted but opens the door to true sharing of DB surplus

26 Nov 2025

Commenting on the key announcements Sophia Singleton, Head of DC at XPS Group said:

“As expected savers will now need to pay National Insurance on salary sacrifice pension contributions over £2,000 a year. This risks impacting levels of pension savings by reducing take home pay and could further undermine trust. We hope that the delay to 2029 is enough time to introduce new incentives to improve long term retirement savings through the Pensions Commission.

One piece of good news that was perhaps under the radar was authorising direct payments to pensioners from surplus, opening the door to true sharing of surplus without adding to scheme pension liabilities. This is good news for the many trustees and employers currently exploring run-on for surplus strategies.

Finally, we welcome the announcement that the government will restore inflation protection on pre-1997 pensions for pensioners in the Pension Protection Fund and the Financial Assistance Scheme where their original scheme provided this benefit. This is a significant step towards addressing the previous inequity that has eroded the real value of many members’ benefits over time. In light of the PPF's £14 billion surplus, linking these changes to a broader review of this surplus the logical next step and likely now be sought by current levy payers.”