Warning Over Potential Changes to Salary Sacrifice Rules
The Society of Pension Professionals (SPP) has cautioned against altering salary sacrifice arrangements amid growing speculation that Rachel Reeves may consider such reforms in the upcoming Budget.
Impact on Employees' Take-Home Pay
Millions of employees risk seeing a drop in their net income if salary sacrifice schemes are reduced or removed. The SPP has communicated these concerns directly to all 650 members of parliament, emphasizing the possible financial consequences.
SPP Report Highlights Risks
In a report released on 6 November, the SPP referenced recent research by HM Revenue & Customs (HMRC) that has fueled speculation about government plans to reform or potentially abolish salary sacrifice arrangements. Such moves are thought to aim at increasing tax revenues.
“[Changing salary sacrifice rules] would represent a sizeable cost to employers and would undermine the critical role that employers play in supporting and promoting good quality pension saving vehicles.”
Role of Salary Sacrifice in Employee Benefits
Salary sacrifice arrangements are widely recognized as a tax-efficient method for delivering employee benefits, particularly pension contributions. This approach gained renewed attention late last year as a means to counterbalance the rise in national insurance contributions announced in the previous Budget.
Author's summary: The Society of Pension Professionals warns that reforming salary sacrifice schemes could reduce employees' take-home pay and disrupt employer-supported pension saving mechanisms.