The SPP warned that changes to salary sacrifice would lead to a reduction in take home pay for millions of workers at a time when they cannot afford it. According to the SPP, around a third of private sector employees make use of salary sacrifice arrangements, along with almost 10% of public sector workers.
The Society of Pension Professionals (SPP) has written to MPs to warn them against axing salary sacrifice on pension contributions.
The SPP warned that changes to salary sacrifice - rumoured to be under consideration by the Chancellor - would lead to a reduction in take home pay for millions of workers at a time when they cannot afford it.
According to the SPP, around a third of private sector employees make use of salary sacrifice arrangements, along with almost 10% of public sector workers.
The SPP said that while there was a £4bn cost to the Government in providing salary sacrifice arrangements (£1.2bn for employees and £2.9bn for employers), there was also, “widespread recognition that this is a positive investment that incentivises pension saving.”
Steve Hitchiner, chair of SPP’s tax group, said: “Changing salary sacrifice arrangements would lead to a reduction in take home pay for millions of employees who are saving into a workplace pension, with the greatest impact for those earning less than £50,284 a year.
“It would also represent another sizeable cost to employers, despite the Chancellor’s public commitment against this, and would undermine the critical role that employers play in supporting and promoting good quality pension saving vehicles.”
Research commissioned and published by HMRC earlier this year has led to speculation that the Government may look to abolish or reduce salary sacrifice benefits for pension contributions.
Salary sacrifice involves employees accepting a reduction in pre-tax salary in return for higher payments into their pension. The process saves National Insurance for both the employee and employer and the employee also pays less tax.
The research from HMRC found that employers were generally very supportive of the arrangement and believe that any changes would cause confusion, reduce benefits to employees and disincentivise pension savings.
The research put forward three potential scenarios for restricting salary sacrifice with employers flagging that in all three scenarios, employee morale was likely to be badly affected.
The SPP is the representative body for providers of advice and services to pension schemes, trustees and employers. It has 90 corporate members employing over 15,000 pension professionals.
