“Recent reports suggest the Government is planning to impose an employer national insurance (NIC) charge on employer’s pension contributions, which is likely to be implemented in one of two ways.
“The first option is the establishment of employer NIC on employer pension contributions above £2000 per year. This not only restricts employer national insurance savings to a maximum of £300 per employee per year, but it also adds to employment cost, which, as evident from the last budget's employer national insurance increase, leads to workforce redundancies, and pay and recruitment freezes across many industries. This move could also see employers restrict employer pension contributions to the statutory minimum of 3%, reducing pension savings for employees. This would be disastrous for the government's pension reform - aimed at boosting workers' pension savings, and would be detrimental to the pensions industry as a whole.
“One way to reduce the detrimental impact of this approach would be to exempt National Minimum Wage (NMW) compliance for pension salary sacrifice purposes. This would allow many of the lowest paid workers to finally benefit from this arrangement. There have been many years of lobbying on this matter, and it appears now could be the ideal time for the government to support millions of working people by implementing this exemption, creating a fairer system which could benefit all employees.
“The second, potentially more devastating move, could be for the government to establish an employer NIC charge on all employer pension contributions. Should this change be implemented, this could not only lead to workforce redundancies, but also an employer abolition of pension salary sacrifice arrangements, removing the national insurance savings for working people - so they take home less net pay.
“In addition, employers restricting their pension contributions to statutory minimums reduces pension savings for employees, impacting the future for millions of working people, as well as disrupting the pensions industry even further. This potential change, mooted before the last budget, could play an even bigger role in shattering employer confidence, and employee trust, impacting the standard of living for many working people for years to come.”
|
