Pensions - Articles - No smoke without fire amid billowing salary sacrifice smog

He said: “There is no smoke without fire and the billowing salary sacrifice smog coming from the Treasury certainly suggests that employers and employees should be preparing for a £2,000 NI efficient threshold to be announced at the Budget on pension contributions that can be made through salary sacrifice arrangement.

 

“Limiting National Insurance relief will lead to a higher tax bill for many pension savers who use salary sacrifice and, as we saw with behavioural changes through the cost-of-living crisis, this financial hit is ultimately likely to lead to further contribution cut-backs eroding pension savings. At a time when the Government has launched a Pensions Commission to solve the problem of pensions adequacy, it feels a retrograde and short-term measure.

 

“There are further consequences. For employers, hot on the heels of the National Insurance hikes at last year’s Autumn Budget, it will represent yet another increase in National Insurance rates in all but name. This will make some consider their options in terms of future recruitment as well as the generosity of existing workplace pension arrangements and salaries.

 

“Also, and this is a kicker for the government, if pension saving reduces, it limits the amount of long-term capital that can be invested back into the UK and productive finance.”