Trade Body Warns MPs About Changes to Salary Sacrifice for Pensions
The Society of Pension Professionals (SPP) has alerted MPs to the risks associated with reducing or ending salary sacrifice schemes for pension contributions. In a paper titled A Sacrifice Too Far, the trade body reviews HMRC research released earlier this year that has sparked speculation about possible changes to salary sacrifice in the upcoming Budget.
Extent of Salary Sacrifice Usage
SPP highlights that approximately one-third of private sector employees use salary sacrifice arrangements, along with nearly 10% of public sector workers. The organization emphasizes that altering these schemes could cause significant disruption to many workers and potentially reduce their take-home pay by hundreds of pounds annually.
Impact on Employees and Employers
Steve Hitchiner, Chair of the SPP’s Tax Group, warned of the broad consequences:
“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.”
Financial Implications
The trade body notes the government bears a £4 billion cost due to salary sacrifice schemes, split between £1.2 billion linked to employees and £2.9 billion related to employers.
Author's Summary
SPP cautions that altering salary sacrifice for pensions risks harming employees’ incomes and increasing employer costs while threatening the support system for workplace pension savings.