3.3m pension savers facing hit with salary sacrifice changes
Millions of pension savers set to lose out after major Budget changes
- Around 3.3 million pension savers are expected to be affected by changes to salary sacrifice rules announced in the Budget, according to HM Revenue and Customs (HMRC) figures.
- From April 2029, pension contributions made via salary sacrifice exceeding an annual threshold of £2,000 will no longer be exempt from National Insurance (NI).
- These contributions above £2,000 will instead be treated as ordinary employee pension contributions and become subject to NI contributions.
- The changes have drawn criticism from pensions industry bodies, who argue many people are already facing financial difficulties in later life and warn of potential reductions in employer pension generosity.
- HMRC estimates the cost of salary sacrifice relief in forgone NI contributions has significantly increased, from £2.8 billion in 2016-17 to £5.8 billion in 2023-24, and was projected to nearly triple to £8 billion by 2030-31 without intervention.