Warning issued over new salary sacrifice rules set to impact pensions
Why millions could lose out from pension salary sacrifice changes
- Upcoming changes to pension salary sacrifice schemes, effective from April 2029, will remove National Insurance Contributions (NICs) exemption for contributions exceeding an annual threshold of £2,000.
- This means pension contributions above the £2,000 threshold will become subject to both employer and employee NICs, potentially impacting workers' take-home pay.
- HM Revenue and Customs initially estimated that 3.3 million pension savers, those sacrificing over £2,000, would be directly affected by these changes.
- However, new analysis from the Office for Budget Responsibility, highlighted by former pensions minister Sir Steve Webb, suggests many workers sacrificing less than £2,000 could also lose out due to employer responses like lower pay rises or changes to pension policies.
- Industry experts, including the Association of British Insurers, warn that the changes could affect far more people than anticipated, leading to increased administration for businesses and a risk of widespread under-saving.
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