Employee Benefits poll: A third (36.1%) of employers do not think the £2,000 per person annual national insurance (NI) cap on pensions salary sacrifice should be introduced.
According to a survey of Employee Benefits readers, 50.8% of respondents do not think the £2,000 per person annual NI cap on pensions salary sacrifice should be introduced as they think it will encourage employees to reduce pensions saving, while 8.2% believe it will prove too costly for employers.
A total of 3.3% think the £2,000 per person annual NI cap on pensions salary sacrifice should introduced, while 1.6% were unsure.
In November, Employee Benefits reported that NI contribution relief on pensions salary sacrifice will be capped at £2,000 annually per person from 2029.
In her Autumn Budget announcement, Chancellor Rachel Reeves stated the costs of this relief were set to increase from £2.8 billion in 2016-17 to £8 billion by 2030-31 without reform, and the use of this has disproportionately benefitted higher earners.
Employees who contribute up to £2,000 into their pension each year via a salary sacrifice arrangement will continue to benefit, but employee and employer NI contributions will be charged on the amount above £2,000 for those who contribute above this.
The cap means 74% of those currently using salary sacrifice will be unaffected.
Zoe Alexander, executive director of policy and advocacy at Pensions UK, said: “Applying NI to salary-sacrificed pension arrangements above £2,000 will harm the economy, businesses and pension saving. However, applying the changes from 2029 should at least give businesses time to prepare and we urge them to consider how they can maintain the generosity of their workplace pension arrangements to lessen the harm to savers’ retirement prospects.”
