Autumn Budget Targets Salary Sacrifice Pensions
Chancellor Rachel Reeves is preparing to introduce significant changes to salary sacrifice pension arrangements in the upcoming Autumn Budget, according to recent reports. The Labour Party Chancellor intends to establish a new £2,000 annual limit for these popular schemes.
How the New Rules Will Work
Under the proposed changes, contributions exceeding the £2,000 threshold would attract National Insurance contributions at standard rates. This means workers would pay eight per cent for earnings below £50,270 and two per cent for income above that level on any amount over the cap. The move represents a fundamental shift in how these pension arrangements are taxed.
Industry Experts Voice Strong Opposition
Pensions expert Steve Webb from consultancy firm LCP, who served as pensions minister in the coalition government, has spoken out against the proposal. "Salary sacrifice is used as a way of reducing the cost to employers of providing decent pensions," Mr Webb shared. "At a time when millions are not saving enough, this is a backward step," he added.
Eamonn Prendergast, Chartered Financial Adviser at Bromley-based Palantir Financial Planning Ltd, described the move as "a tax on working people, plain and simple." He argued that "these schemes aren't loopholes, they're lifelines for millions who sensibly save for their future."
Rob Mansfield, Independent Financial Adviser at Rootes Wealth Management in Tonbridge, suggested the government was "shooting itself in the foot" with the proposed changes. He highlighted that salary sacrifice is particularly beneficial for higher-rate taxpayers who receive full tax relief automatically.
Earlier this week, PensionBee's chief business officer Lisa Picardo had also criticised the potential cap, describing salary sacrifice as an "efficient way to boost pension contributions" and warning it would "disincentivise companies who provide workplace pensions."
The proposed changes come amid Budget rumours of potential National Insurance cuts, which experts suggest would naturally erode the benefits of salary sacrifice arrangements regardless of the new cap.
