Employers will have an increased incentive to enrol employees in salary sacrifice schemes says Mike Ambery, Retirement Savings Director at Standard Life, part of Phoenix Group, as he comments:
“The Chancellor has decided not to introduce National Insurance (NI) on pension contributions but a rise in employer NI by 1.2% to 15% on earnings has been confirmed. While the resulting higher staffing costs could impact some businesses ability to increase pension contributions, there’s an important potential pensions side effect. Workplace pensions could see a boost via an increased incentive to contribute via a salary sacrifice arrangement, where employees agree to reduce their pay in exchange for higher pension contributions. Both employers and employees reduce their NI liability as a result, which will now have a bigger impact for the employer. It’s worth noting that not all employers offer salary sacrifice schemes and those on lower incomes are less likely to be enrolled in one – but, taken alongside pre budget speculation, and with no changes to tax relief or tax-free cash, this could be seen as adding to a relatively positive pensions Budget.”
