Summary
Chancellor Rachel Reeves announced a change that will limit the amount of money workers can put into their pensions without paying national insurance. Starting in 2029, a cap of £2,000 per year will apply to the salary sacrifice method for pensions, which currently allows for higher contributions. This change aims to generate an estimated £4.7 billion in extra national insurance contributions by that year.
Key Facts
- A new cap of £2,000 per year on salary sacrifice for pensions will start in 2029.
- The current system allows for larger amounts to be sheltered from national insurance.
- This change is expected to raise £4.7 billion in national insurance contributions.
- Salary sacrifice lets workers put money into pensions before income tax and national insurance are applied.
- Chancellor Reeves stated the current policy benefits high-income earners.
- The cap is designed so low-and-middle income earners can still use the scheme without higher taxes.
- Around a third of private sector employees and 10% of public workers use salary sacrifice for pensions.
- Former pensions minister Steve Webb suggested companies might change their pay and pension structures before 2029 to avoid extra charges.
