Pension UK, the voice of UK pension schemes, has welcomed a Lords amendment to the Pensions Bill which would raise the proposed £2,000 limit on salary sacrifice to £5,000.
Pensions UK says it is "strongly supportive" of the Lords' amendment to the Bill although it has yet to be accepted by the Government.
Zoe Alexander, executive director of policy and advocacy at Pensions UK, said; “We are strongly supportive of amendments that exempt basic rate tax payers from limits on using salary sacrifice arrangements, and raise the cap to £5,000. These amendments would reduce or remove the negative impacts of changes to salary sacrifice on the majority of savers.
“To be clear, our preferred outcome hasn’t changed. We still believe that changes to salary sacrifice should not take place. Even with these amendments, the policy risks pulling more people off track at a time when pension adequacy is already a serious challenge for many people, including those earning above the median. We should be making it easier for people to save for a decent retirement, not harder.
“With the Pensions Commission now underway, this is exactly the kind of issue that should be considered in the round. Rushing through changes to salary sacrifice ahead of that work risks cutting across the evidence‑based approach the Commission has been set up to deliver.”
The House of Lords has made five amendments to the Government’s Pensions Bill outlining pension salary sacrifice changes, including voting to increase the annual cap on employee contributions for full National Insurance relief from £2,000 to £5,000.
Ministers also confirmed during debates in the House of Lords that the proposed cap would apply per employment, rather than per individual.
The National Insurance Contributions (Employer Pensions Contributions) Bill is now returning to the House of Commons, which may make further changes in an attempt to remove the amendments.
Chancellor Rachel Reeves announced in the last Budget plans to restrict salary sacrificed annual contributions to £2,000 from April 2029.
The move has caused a furore with many pension professionals attacking the move. The Treasury believes the current salary sacrifice rules, which allow almost unlimited salary sacrifice, are too generous and encourage people to avoid paying tax and National Insurance on earnings by moving salary into pensions, depriving the Treasury of revenue.
Salary sacrifice has proved increasingly popular in recent years with some experts estimating one in three workers are using it, particularly the better paid.