Salary Sacrifice Pension Contributions
A restriction on national insurance (NIC) relief obtained through salary sacrificing employee pension contributions was announced to come into effect from April 2029.
From April 2029, only the first £2,000 of employee pension contributions paid through salary sacrifice will benefit from national insurance (NIC) savings. Currently all pension contributions paid through salary sacrifice are free from both employer and employee NIC.
Going forward any such employee contributions over £2,000 will be subject to both employers and employees national insurance. For the avoidance of doubt, they will still be exempt from income tax.
What is somewhat surprising is that the announcement seems to confirm that the employer element of all pension contributions will continue to be free from NIC.
The government therefore seems to be targeting the employee element only of any workplace pension arrangement and not all employer pension contributions in general as some may have feared.
It is not yet clear how these changes will impact owner managed businesses where directors choose to make employer pension contributions from their own limited company.
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