With the cash ISA limit kept at £20,000, tax on savings income rising again and the Lifetime ISA due to give way to a First Time Buyer ISA, corporate advisers need a clear view of where payroll savings fit next to an employer’s workplace pension.

In reading this article you will understand:

  • What the 28 October 2026 Budget decided on the cash ISA limit, savings income tax and the First Time Buyer ISA, and which parts still need legislation.
  • What the FCA’s 2025 statement on workplace savings schemes says about the employer’s role, financial promotions, minimum wage risk and the provider’s Consumer Duty obligations.
  • How the main workplace savings models fit alongside a workplace pension, and what to cover when an employer client asks about adding one.

The cut to the cash ISA limit will not happen. In the Budget on 28 October, Chancellor John Healey kept the limit at £20,000 for all adults, dropping the plan to restrict under-65s to £12,000 in cash from April 2027. He also announced a further rise in tax on savings income, the second Budget running to do so, and confirmed that a First Time Buyer ISA will replace the Lifetime ISA for new savers from April 2029. Our Budget round-up covers the wider changes; this piece focuses on payroll savings alongside the workplace pension.

Where the Budget Leaves Workplace Savings

The cash ISA decision still needs secondary legislation, which HMRC says will be laid in November 2026, but the policy is clear: from April 2027 every saver aged 18 or over can still put the full £20,000 allowance into cash. HMRC has also confirmed that the regulations made in September 2026 to bring in the £12,000 limit, and the anti-avoidance rules that came with them, will be revoked.

Tax outside a wrapper is going up. Budget 2025 had already raised the savings rates by two points, to 22%, 42% and 47%, from 6 April 2027. This Budget adds two more, so from that date the rates are set to be 24%, 44% and 49%, subject to Finance Bill 2026-27. The personal savings allowance is unchanged at £1,000 for basic rate and £500 for higher rate taxpayers, and the Budget document says a basic rate taxpayer would need more than £25,000 in savings, on top of any ISA, before paying tax.

Many payroll savers are nowhere near that. The Government’s Financial Inclusion Strategy, published in November 2025, reports that new joiners in SUEZ UK’s autosave scheme save an average of £40 a month. Savings built at that rate will rarely create a tax bill. The wrapper matters more for higher rate employees with larger cash balances, who have only £500 of allowance and will pay 44% on interest above it.

The Lifetime ISA Gives Way to a Home-Buying Account

The Treasury’s consultation response, published on Budget day, sets out the First Time Buyer ISA. Savers can pay in up to £4,000 a year within the overall ISA allowance, and the government will add a 25% bonus on the final account balance, up to a maximum bonus of £20,000, when the money goes towards a first home costing no more than £450,000. Anyone aged 18 or over can open one, with no upper age limit, and there is no withdrawal charge. Primary and secondary legislation is still needed before launch.

The new account has no retirement role, unlike the Lifetime ISA, which can be drawn without penalty from age 60. The Treasury’s costing of the First Time Buyer ISA assumes that some people who would have used a Lifetime ISA for retirement will save into personal pensions instead.

Existing Lifetime ISA holders can keep paying in under the current rules, but cannot transfer into the new account. From 29 October 2026, the charge for using Lifetime ISA money on a home above the £450,000 cap falls from 25% to 20%, which returns the saver’s own contributions and removes the bonus.

Some workplace platforms offer a Lifetime ISA through payroll; Fidelity’s Invest@Work offers one alongside a stocks and shares ISA and an investment account. Employers using one should expect that option to close to new savers when the replacement arrives, and scheme literature should not present it as an alternative to the workplace pension, which carries employer contributions and tax relief.

What the FCA Expects of Employers and Providers

The FCA’s statement on workplace savings schemes, published on 27 August 2025, said schemes can be structured so that the employer does not carry out a regulated activity, though each employer should consider whether its own model does. Communications that simply inform or educate staff are not financial promotions. Material that encourages employees to join could be, and, unless an exemption applies, must then be issued or approved by an authorised firm. To avoid minimum wage problems, schemes should not leave the money with the employer, charge staff to access it, or delay access. The statement places Consumer Duty obligations on the savings provider, as for any other product; an employer that is not carrying on a regulated activity is outside the Duty.

The FCA, citing the DWP, said only 7% of UK employers offer a workplace savings scheme, and its Financial Lives 2024 survey found one in ten people have no cash savings. The statement covers opt-in schemes, because opt-out would likely need action from several authorities, possibly including legislation. The evidence favours opt-out. Nest Insight’s March 2025 report Easier to Save found participation at SUEZ rose from 1 in 100 employees under opt-in to 47 in 100 under opt-out, and at Co-op and Bupa from 16 in 100 to 71 in 100. Its trial data suggests opt-out payroll saving into instant-access pots does not crowd out pension saving.

What It Means for Advisers

Employers have three broad models. The simplest is a payroll deduction into an easy-access account run by a bank, building society, credit union or specialist provider, which suits an emergency fund. Workplace investment platforms add a stocks and shares ISA and sometimes a Lifetime ISA. Sidecar designs, which link a short-term pot to pension saving, have so far been tested mainly in research trials.

In each case the provider must be authorised: by the PRA for banks, building societies and credit unions, which the FCA also regulates, or by the FCA for e-money firms. The employer chooses the provider, runs the deductions, shares data on a lawful basis and promotes the scheme with provider-approved material. Your role is to keep the design close to the evidence: an accessible cash pot first, investment products after, and any matching budget aimed at the staff who need it most.

The pension comparison needs care. ISA subscriptions get no income tax relief going in, the Lifetime ISA bonus aside, while salary-sacrificed pension contributions currently avoid employee and employer National Insurance. Under the National Insurance Contributions (Employer Pensions Contributions) Act 2026, only the first £2,000 a year will keep that advantage from 6 April 2029. The Budget made no change to the cap. April 2029 is also when the First Time Buyer ISA is due, so employers planning reward for that year will be weighing both at once.

The cash ISA regulations are due in November, the First Time Buyer ISA needs primary legislation and the salary sacrifice regulations have no published timetable, so confirm the latest position before putting a workplace savings proposal to a client.

Things to reflect on for CPD

  • Which of your employer clients offer a payroll ISA or Lifetime ISA, and how will the move to a First Time Buyer ISA in April 2029 change what their staff are told?
  • How would you explain to an employer the difference between informing staff about a savings scheme and making a financial promotion, and who should approve the scheme literature?
  • Where an employer wants to improve staff financial resilience, how would you weigh an easy-access payroll savings scheme against enhanced pension contributions or matching?
  • How will higher tax on savings income and the April 2029 salary sacrifice cap feature in the reward reviews you carry out with employer clients?