MPs have received an update from the pensions industry on the impact of proposed salary sacrifice changes for both employers and employees.
The Society of Pension Professionals has put together this information for MPs, to help inform decisions as this key Budget announcement move onto the statute books, and to help them explain the changes to constituents.
This research paper explains that restricting salary sacrifice will mean higher costs for both employer and employees. But it points out that when these changes comes into effect, in April 2029, there will still be savings to be made by using these schemes.
In November’s Budget Rachel Reeves announced that salary sacrifice would be severely restricted, with national insurance savings only allowed on personal pension contributions up to £2,000 a year.
The SPP paper explains what salary sacrifice is, who the restrictions will impact, the effect on employers, employees and the economy.
The briefing also advises on next steps – suggesting that employees and employers should carry on taking advantage of salary sacrifice given these changes do not take effect until April 2029.
The SPP paper adds: “…once the restrictions come into force, salary sacrifice will still be worthwhile as savings can still be made, they will simply be less generous than they currently are for those with personal pension contributions above £2,000 per annum.”
Steve Hitchiner, chair of the Society of Pension Professionals tax group adds: “The decision to restrict salary sacrifice for pensions will result in higher costs to employees and employers, along with less saving in pensions when more saving is needed. The additional revenue raised by the Exchequer will both diminish and is uncertain.
“Nevertheless, employers and employees should continue to use salary sacrifice where possible and pension saving remains the most effective means of saving for later life.”
