"Employees in the middle-income bracket would incur an 8 per cent National Insurance charge on contributions exceeding £2,000, compared with just 2 per cent for those earning above £125,000."
"The proposed changes would impose a 15 per cent National Insurance charge on employers for contributions above the cap, significantly reducing the financial incentive to offer top-up contributions."
"This creates what has been described as a '23 per cent efficiency cliff' for affected workers, effectively eroding the advantages of saving more into pensions through salary sacrifice."
The proposed £2,000 cap on National Insurance relief for pension contributions could disproportionately impact middle-income workers earning between £35,000 and £50,270. These workers face an 8% National Insurance charge on contributions exceeding the cap, while high earners above £125,000 incur only a 2% charge. This creates a significant penalty for professions like nursing and teaching. Additionally, the cap may reduce employer incentives for salary sacrifice schemes, leading to a potential reduction in pension contributions for affected employees.
Read at Business Matters
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