Autumn Budget pension changes spark concerns over IHT & new cap
New measures to clarify inheritance tax (IHT) processes for the administration of estates containing pensions have drawn a mixed response from industry leaders, following the government's Autumn Budget announcement. Changes to salary sacrifice pension schemes have also prompted calls for businesses to pay close attention to the wider impact on employees as a new cap is introduced.
IHT process concerns
Reaction from industry body The Investing and Saving Alliance (TISA) acknowledged the greater clarity provided by the new IHT process but highlighted potential problems for personal representatives handling estates that include pension assets.
"This is some much-needed clarity on the changes to IHT and is welcomed. However, the new process for IHT could lead to a significant number of non-exempt pension pots being caught in limbo for up to 15 months through personal representative requests to withhold 50% of pension funds. This risks causing more stress at what is often a traumatic time, and for those classed as vulnerable who may be reliant on receiving the money to which they are entitled, it will add increasing pressure at the worst possible moment," said Renny Biggins, Head of Policy - Products & Long-Term Savings, The Investing and Saving Alliance.
TISA, whose member firms include investment managers, pension providers, banks, and financial advisers, has previously advocated for processes that minimise complexity for bereaved families and vulnerable individuals. The concerns focus on the risk that funds may be held back for over a year in some cases, leading to delays in settling estates.
Pension cap impact
The Autumn Budget's introduction of a GBP £2,000 National Insurance Contribution-free cap on salary sacrifice pension arrangements has been seen as a major development for businesses and their employees, though the new measure will not come into effect until 2029.
UK businesses have made wide use of salary sacrifice pension schemes to support both workforce savings and business sustainability. The announcement means there will now be a limit to how much employees can contribute through these arrangements without incurring additional tax charges.
Kimberley Rowbottom, HR Director at Pluxee UK, said: "The Autumn Budget salary sacrifice pension cap predictions suggested UK businesses were in for another turbulent year in 2026. Salary sacrifice schemes, particularly those related to pensions, have been invaluable for both employers and employees, enabling individuals to plan for a brighter future in a way that's sustainable for businesses to support in the long term. While the predictions were accurate, neither employer nor employee will face any immediate changes; the £2,000 NIC-free cap won't take effect until 2029."
Business and employee response
The deferral of the cap to 2029 provides businesses with a window to prepare for the eventual change. HR and finance leaders are being advised to take proactive steps to assess the potential effects on their workforces and review their employee benefits strategies accordingly.
Alexis De Maredsous, Finance Director at Pluxee UK, said: "The most important step is to work closely with your finance teams to understand the real impact, and then consider how your benefits, wellbeing support and communication plans may need to flex. HR leaders should now assess the broader effects on disposable income, as this shapes employee behaviour, financial resilience and ultimately workplace engagement. For finance leaders, these factors translate into one core question: What will this mean for your people, and how can you help them navigate it?"
