BUDGET 2026: What you need to know if you’re planning or in retirement

The Budget didn’t bring sweeping changes to pensions, but there are a few announcements worth understanding if you’re planning for or in retirement. The biggest long-term change is to how the State Pension will increase, alongside a planned cap on pension contributions made through salary sacrifice.

Why does this matter?

1. The State Pension will change from 2030

The Government has confirmed that the State Pension Triple Lock will be adjusted from April 2030.

Until then, the State Pension will continue to rise each year by the highest of inflation, earnings growth or 2.5%.

From April 2030, it will still rise every year, but the rules will change. Instead of continuing to increase by whichever of those three measures is highest, it will rise by the highest of 2.5%, inflation or the amount needed to maintain its value relative to earnings in April 2029.

The Government says this will make the State Pension more sustainable over the longer term.

If you’re planning your retirement, it’s worth remembering that the State Pension is only one part of the picture. Your workplace and personal pensions, savings and other investments will also affect how comfortably you can live.

2. A change to pension salary sacrifice is planned

The Government is continuing with plans to cap the amount of pension contributions that can be made through salary sacrifice without National Insurance contributions being charged.

Salary sacrifice is an arrangement where you give up part of your salary in exchange for an employer pension contribution. It can make pension saving more tax-efficient, as both you and your employer may save National Insurance.

The planned cap means some contributions made through salary sacrifice will no longer receive the same National Insurance advantage. This change is due to take effect in April 2029.

If you use salary sacrifice to boost your pension, it’s worth understanding how the change could affect you. It doesn’t mean you should stop contributing to your pension, but it may affect the most tax-efficient way to save.

3. Some pension death benefits will have simpler tax rules

From 28 October 2026, the Government is removing the two-year rule that can make certain pension death benefits taxable if they are not paid within two years of the scheme administrator becoming aware of the member’s death.

This means qualifying tax-free pension and lump sum death benefits will no longer become taxable solely because payment takes longer than two years.

This is mainly relevant to people thinking about how their pension could support loved ones after their death, rather than the day-to-day business of building a retirement pot.

4. There is some reassurance for lower-income pensioners

From April 2027, a new Pension Tax Allowance will help prevent pensioners with total income around the value of the full new State Pension from having to pay small amounts of income tax simply because the State Pension has increased.

The allowance will be tapered for people whose income is slightly higher, so it won’t apply to everyone.

If you’re approaching retirement, this is a useful reminder to consider how your State Pension and other income will interact for tax purposes.

What can you do?

The Budget doesn’t change the fundamentals of retirement planning. The most useful steps are to:

• Check your State Pension forecast so you know what you may receive and when.
• Review your workplace and personal pension savings, including whether your contributions are on track for the retirement you want.
• If you use salary sacrifice, understand how the planned 2029 change could affect you.
• Consider the tax you might pay on your combined retirement income, rather than looking at each pension in isolation.