"The policy results in an increase in NICs ( national insurance contributions) which is estimated to raise £4.7 billion in 2029/30 and £2.6 billion in 2030/31. The costing assumes that, in most cases, employee pension contributions above £2,000 that were part of a salary-sacrifice scheme will become subject to employer and employee NICs, either because they move to a standard pension scheme or continue in a salary-sacrifice scheme under the new tax arrangements."
"Capping pension salary sacrifice will ring alarm bells across the country. It will not only hit the long-term financial health of employees but also impacts businesses who use salary sacrifice as a cost-effective tool to reward staff and boost talent attraction, retention, and productivity. These employers will need to find other approaches to support employees or risk losing a competitive edge which will ultimately impact UK growth."
Salary-sacrificed pension contributions above £2,000 will become subject to employer and employee national insurance contributions from April 2029. The national insurance exemption for these contributions will be removed, treating them as ordinary employee contributions in the tax system. The change is estimated to raise £4.7 billion in 2029/30 and £2.6 billion in 2030/31. In most cases, affected contributions will either move to standard pension schemes or remain in salary-sacrifice arrangements but be subject to NICs. The shift will increase costs for employees and employers and reduce the net long-term retirement savings of affected workers.
Read at London Business News | Londonlovesbusiness.com
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