"Aviva chief executive Dame Amanda Blanc has urged the chancellor to rethink plans for a major clampdown on salary sacrifice schemes, warning that the move would penalise both employers and workers while damaging long-term pension saving across the UK. Speaking ahead of Rachel Reeves' 26 November budget, Blanc said Aviva was "very concerned" about the Treasury's intention to cap the amount workers can sacrifice tax-free to just £2,000 a year - a change expected to raise around £2 billion annually."
"Salary sacrifice allows employees to give up part of their gross pay in return for pension contributions or other benefits. Because the contribution is taken before tax and national insurance (NI), both individuals and employers save on NI payments. At present, workers can contribute up to £60,000 a year into pensions tax-free under the system. But pensions experts warn that Reeves' proposed cap would sharply increase NI bills for employers and employees, likely leading many companies to reduce the generosity of their pension contributions."
Chancellor's plan to cap salary sacrifice tax-free at £2,000 would raise about £2bn but remove NI savings that benefit employers and employees. Salary sacrifice currently allows employees to exchange gross pay for pension contributions taken before tax and NI, enabling both parties to save; workers can contribute up to £60,000 tax-free. The cap would increase NI bills for employers and employees, likely prompting firms to reduce pension contribution generosity and discouraging individual saving, exacerbating low retirement saving for about 15 million people. The policy would follow last year's employer NI increase and could impose significant costs on businesses. Aviva reported a strong third-quarter update.
Read at Business Matters
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