Pensions - Articles - Changing the inner workings of salary sacrifice

 Unlike changes to pensions tax free cash which has some popular understanding, the inner workings of salary sacrifice are poorly understood.

 “The changes mooted over the weekend would largely affect middle and higher earners in the private sector who are currently able to reduce their take home pay in exchange for pension contributions that are not subject to income tax or national insurance. By limiting the amount of income that can be sacrificed without paying National Insurance, the government will be increasing the cost of pension contributions to both the individual and the company if the level of contributions is maintained. Ultimately, the impact of National Insurance being paid will be felt in employees’ pockets with less take home pay and in employers’ payrolls with higher costs.

 “Of all the changes being floated in relation to pensions this is one of the least impactful but undoubtedly it still comes at a cost to savers. The government is navigating a difficult path while looking to shore up the nation’s finances and at the same time running a Pension Commission designed to increase levels of savings. We hope that a rounded view will be taken at the Budget and that the long-term challenge of ensuring people reach later life with sufficient savings will be kept front of mind in the government’s thinking.”