Budget sparks industry concerns over pensions, LISAs & AI plans

The Chancellor's latest Budget measures have prompted criticism from leading financial industry voices, with concerns raised about moves to restrict salary sacrifice pension contributions, plans to consult on Lifetime ISA reform, and a renewed focus on the UK's productivity and AI strategies.

Salary sacrifice

The government will cap National Insurance exemptions for salary-sacrificed pension contributions at GBP £2,000 per year from April 2029. This change is seen by some within the sector as potentially damaging to pension savings.

"The Government is arm-wrestling itself over pensions. One hand recognises the retirement income crisis facing this country, while the other limits the very schemes used to incentivise pension contributions. This move will only further undermine pensions adequacy and retirement saving. We need to focus on encouraging, not penalising, saving into private pension pots," said Renny Biggins, Head of Policy - Products & Long-Term Savings, The Investing and Saving Alliance.

Biggins also questioned the broader implications for the UK's pension system. "Saving for retirement is a long-term commitment, and any changes to the pension framework need to be carefully considered. The Government risks injecting further uncertainty into the pension framework and eroding overall confidence in our pension system. What we need now is stability and consistency in the pension landscape," said Biggins.

Lifetime ISA future

In the same Budget, the Treasury announced a 2026 consultation on the future of the Lifetime ISA, with plans to introduce a new product for first-time homebuyers. This move has generated concern among industry representatives who warn against major changes to existing savings products.

"This is a moment for sensible reform of the Lifetime ISA, not a rush to scrap it. LISAs have helped a generation of first-time buyers save for a deposit and, crucially, given many - particularly the self-employed - a simple, engaging way to build retirement savings," said Carol Knight, CEO, The Investing and Saving Alliance.

Knight emphasised that clarity for existing savers should be maintained. "As the government consults on a new ISA for homebuyers, it must protect the strengths of the LISA and give clarity and fair treatment to existing savers - not dismantle a product that is already delivering for those trying to save for both a first home and later life," said Knight.

Productivity challenge

The Budget also laid bare the continuing productivity challenges in the UK, with figures from the Office for Budget Responsibility showing a further downgrade with an estimated cost of GBP £16 billion to the UK economy.

Laura Reeves, International Client Director at Nexthink, highlighted digital friction as a major contributor to lost productivity. "The UK's productivity problem is now impossible to ignore. With the OBR downgrading productivity at the cost of £16bn to the UK economy, every minute of wasted employee output matters. The problem is that business leaders consistently underestimate how much time employees are losing - around 470,000 hours a year for the average enterprise," said Reeves.

Reeves pointed to the impact of technology on daily operations. "A key cause of the UK's productivity drain is digital friction. Employees lose time every day due to digital interruptions, including slow systems, crashing apps, login failures. These disruptions accumulate for staff leading to fractured concentration, error rates, and reduced output. Because fewer than half of these issues are ever reported, the gap between what organisations think they're losing and what's happening can add up hundreds of thousands of 'missing' hours," said Reeves.

On addressing this issue, Reeves added, "To turn the tide on the productivity drain eroding business output and the UK's budget, leaders must understand the digital pain points employees face every day, and work to eliminate them by improving the employee experience."

AI investment

The Budget includes a multi-billion-pound investment package for artificial intelligence, with accompanying commentary focusing on the need for improved data readiness across British organisations before AI can be successfully adopted.

Bernadette Wightman, UK & Ireland CEO at Iron Mountain, said, "With billions of pounds of investment announced for Artificial Intelligence across the UK, there is now an even greater need to ensure that all UK unstructured data is AI-ready. This can be achieved by allowing British organisations to unlock the full power of unstructured data to accelerate progress and guarantee that data is reliable, accessible, and useful for AI applications. This requires making the necessary infrastructure investments, honing skills, and creating strong governance structures."

Wightman went on to highlight security and legacy challenges associated with data use. "While it's encouraging to see AI taking centre stage, we must not overlook the foundations needed for responsible adoption. Iron Mountain's latest research with Foundry shows that 56% of IT leaders are concerned about end-of-life data exposure, yet only a fraction of security budgets go towards safe IT asset disposition. If the UK is to unlock AI's potential and protect sensitive information, organisations need to prioritise investing in making their unstructured data AI-ready and ensure robust processes are in place to securely shift away from managing and disposing of legacy technology," said Wightman.