Royal London reaction to UK Budget 2025

Salary sacrifice

Royal London's Director of Policy Jamie Jenkins comments:

"As had been widely trailed and ultimately, leaked, salary sacrifice for pensions will be limited to £2,000. However, it will not be effective until 2029, giving employers more time to make the necessary changes.

"Not all employers offer salary sacrifice and, of those that do, not all share the more substantial National Insurance (NI) savings. While there will be an impact on what is being paid into some people’s pensions, the bigger story may be the effective rise in employer costs, where the savings made on NI were being used for other purposes.

"While unwelcome, restricting salary sacrifice is perhaps the least worst outcome for pensions.

"Those being enrolled into a workplace pension will continue to benefit from full income tax relief and mandatory pension contributions. And for now at least, 25% tax-free cash.

"Amidst all the noise, let’s not lose sight of that."

Cash ISA limit

Royal London's Consumer Finance Expert Sarah Pennells comments:

"The Chancellor’s confirmation that the cash ISA limit will fall to £12,000 from April 2027 won’t affect the majority of ISA savers. Our research shows that only 16% of ISA holders save or invest the maximum £20,000 annual allowance. The fact that the full £20,000 cash ISA allowance is being retained for those over the age of 65 will be welcome by those pensioners who rely on cash savings to boost their retirement income, but who don’t necessarily want to invest.

"The FCA has estimated that there are 8.6 million people with £10,000 or more in cash savings that could be invested. Our research shows that 6 in 10 people with money in cash ISAs could be persuaded to invest in a Stocks and Shares ISA.

"However, it also shows that concern among consumers that they don’t have enough money to invest, and a lack of understanding of investing, are among the main barriers. Reducing the cash ISA limit will do nothing to address this.

"However, the introduction of Targeted Support, from April, will enable financial providers to offer personalised guidance to those who don’t have an adviser, which could encourage some who previously haven’t thought about investing, to do so."