The government was defeated five times in the House of Lords last week over the National Insurance Contributions (Employer Pensions Contributions) Bill, which caps NI relief on pension salary sacrifice at £2,000 a year.
The most significant development came with Amendment 5, which ensures contributions above the cap do not count towards student loan repayments. The change is aimed at preventing higher repayments and avoiding distortion of pension incentives.
In a LinkedIn post, Baroness Ros Altmann warned: “This Bill needs to be put on hold until the Government works out how it can possibly work in practice without adding significant new costs and complexity to the pension system, and reducing future pensions. What’s the rush – this isn’t due to start till 2029.”
Previously she has warned that the proposals to limit salary sacrifice risk damaging longer term retirement outcomes.
Other amendments exempt basic rate taxpayers, small and medium-sized enterprises, charities and social enterprises, temporarily raise the contributions limit to £5,000 and require most regulations to get parliamentary approval.
Ministers confirmed the £2,000 cap applies per job, allowing employees with multiple jobs to benefit in each role.
The Lords’ changes leave employers and advisers with more uncertainty about how the Bill will work before 2029.