Employers could face fresh financial pressures as speculation grows over potential government reforms to pension salary sacrifice schemes. This follows the publication of HMRC research, which has reignited concerns that changes may be on the table in the upcoming Autumn Budget.
The study, conducted in summer 2023 under the previous government, explored employer experiences, motivations, and attitudes toward salary sacrifice arrangements for pensions. It also examined how hypothetical reforms to tax reliefs—such as changes to National Insurance contribution (NIC) relief—might influence employer behaviour.
Kate Smith, Head of Pensions at Aegon comments: “Since the advent of auto-enrolment, many employers have used salary sacrifice to fund pension contributions. Interest in these arrangements has surged following April’s hike in employer NICs from 13.7% to 15%, alongside a sharp drop in the earnings threshold from £9,100 to £5,000.
“Salary sacrifice allows employees to exchange part of their salary for non-cash benefits, such as pension contributions, in a tax-efficient manner. These contributions are exempt from income tax and NICs, making them attractive and more affordable for both employers and employees.
“Any move to reduce or remove the benefits of salary sacrifice would be a blow to both employers and pension savers, potentially leading to and lower retirement savings outcomes. It could also impact the government’s growth agenda if there was a reduction in contributions flowing into growth assets. While no policy changes have been confirmed, the release of this research has intensified scrutiny ahead of the Budget.”
|
