Government will introduce a £2,000 cap on the amount that workers can pay into their pension via salary sacrifice
Government will introduce a £2,000 cap on the amount that workers can pay into their pension via salary sacrifice
A HMRC salary sacrifice rule change has left one million households will be almost £900 a year worse off. Rachel Reeves, the Labour Party Chancellor, has launched a tax raid on salary sacrifice schemes.
And the Institute for Fiscal Studies (IFS) has warned targeting pension salary sacrifice contributions will hit 4.7 million employees when it comes into force in April 2029.
The Labour Party government will introduce a £2,000 cap on the amount that workers can pay into their pension via salary sacrifice before contributions are liable for National Insurance (NI).
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The IFS said the top 10 per cent of earners had the most to lose from the reforms, with around one million households to be £888 worse off on average each year.
In total, households affected by the raid will be £540 worse off on average, according to calculations by the think tank.
Sir Steve Webb, a partner at LCP and former pensions minister, said: “The policy doesn’t just affect people putting thousands into pensions.”
Mr Webb, who was the creator of the Triple Lock metric, added: “It affects people on modest wages, who may not be putting much in a pension, but whose pay just gets held down for possibly years because of all of this.”
The former Liberal Democrats and Conservative Party pensions minister dded that the changes would also force businesses “to divert time and energy to recouping the costs and perhaps rearranging their pensions instead of getting on with the day job of creating jobs and growth”.
Matthew Oulton, a research economist at the IFS, said: “Rather than being a principled reform to the taxation of pensions, the change creates another new arbitrary line in the tax system.”
The Government said it did not recognise the figures and the “vast majority” of people would not be affected.