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Workplace Pensions: Tax Allowances

Answer

A Tax Information and Impact Note (TIIN) was published alongside the introduction of the Bill containing the changes to pensions salary sacrifice. The TIIN is available here:

https://www.gov.uk/government/publications/salary-sacrifice-reform-for-pension-contributions-effective-from-6-april-2029

As set out in the TIIN, of the estimated 7.7 million employees who currently use salary sacrifice to make pension contributions, 3.3 million sacrifice more than £2,000 of salary or bonuses. This means 44% would be impacted by this measure, while 56% - around 4.3 million people - are fully protected by the £2,000 threshold. Of those with salary sacrifice contributions in excess of the cap, the average additional employee NICs liability is estimated to be £84 for the tax year 2029/30.

The Office for Budget Responsibility’s (OBR) Economic and Fiscal Outlook (EFO) set out the estimated yield for this measure. Their assumption on passthrough is in line with assumptions for previous changes to employer NICs and is also reflected in the Government’s published costing note.

This change applies to all employers who use salary sacrifice for pensions, regardless of whether they are public sector or private sector. Many public sector employers are prohibited from using salary sacrifice for pensions under the rules of "Managing Public Money."

The government supports all individuals to save into pensions through a generous system of income tax and NICs reliefs worth over £70 billion a year.

This is the fairest way to support pensions saving whilst ensuring relief is targeted at those who need it most.

Secondary information

Type

Written question

Reference

HL12588

Session

2024-26

Attachment

SalSac TIIN

Grouped for answer

Yes

Subjects

Employees' contributions Private sector Workplace pensions Public sector Tax allowances

Contains statistics

Yes

Link

View this Written question on www.parliament.uk