Budget 15th March2023, any pension changes predictions or views?

Albermarle

michaels said:

What is the thinking behind an increase in the mpaa?  Is it supposed to encourage those who have already started taking some pension back into the workforce?

Yes, as £4K is not very high even for a middle earner. It used to be £10K, and the other point about increasing the MPAA is that it will cost the Govt nothing, and will not cause them any political problems.

Albermarle

Gary1984 said:

I just don't see how abolishing salary sacrifice works unless you start taxing employer pension contributions which just opens another can of worms.

It's just an agreement where your employer pays you X less and pays X more into your pension. If salary sacrifice is abolished why can't I negotiate these terms myself directly with my employer and get to the same end result?

Many companies do not operate a salary sacrifice scheme for contributions, and the employer contributions are just made direct into the pension ( separate from your contributions) with no tax issues.

NedS

Gary1984 said:

I just don't see how abolishing salary sacrifice works unless you start taxing employer pension contributions which just opens another can of worms.

It's just an agreement where your employer pays you X less and pays X more into your pension. If salary sacrifice is abolished why can't I negotiate these terms myself directly with my employer and get to the same end result?

It's really easy to implement - you just make it unlawful. Most employers will not want to knowingly fall foul of the law / HMRC.

It's less easy to police / enforce - as you say, how do HMRC prove such a negotiation has taken place?

It could be as simple as the fact you are receiving higher pension contributions and a lower salary than your colleague doing the same job, which would then be unlawful.

Consider a company has a published pension scheme where they pay X% employer contributions, and anything in excess of that is deemed to be tax (NI) evasion and unlawful. It would be easy to spot any cases where one (or a number of) employee(s) were treated differently from others. Employer pension contributions could be varied by grade across large employers to allow employers to benefit employees on lower pay scales more favourably etc. But the key premise is that all employees are treated equally and no one has chosen to sacrifice salary for additional pension benefits.

vacheron

NedS said:

Gary1984 said:

I just don't see how abolishing salary sacrifice works unless you start taxing employer pension contributions which just opens another can of worms.

It's just an agreement where your employer pays you X less and pays X more into your pension. If salary sacrifice is abolished why can't I negotiate these terms myself directly with my employer and get to the same end result?

It could be as simple as the fact you are receiving higher pension contributions and a lower salary than your colleague doing the same job, which would then be unlawful.

I am not an employment law specialist, but how could this be unlawful?

We have many employees paid different salaries for doing the same job, and every employee that pays AVC's into their pension is receiving higher pension contributions and a lower salary? Are you saying if someone chooses to pay more, that they can't unless everyone else does?

We also have people doing the same job in different pension schemes with different contribution levels, as do many other companies I am aware of?

This is negotiated at the time of employment and during pay reviews etc. If I get a 3% rise and my better performing collegaue receives 5% is this unlawful?

 

NedS

vacheron said:

NedS said:

Gary1984 said:

I just don't see how abolishing salary sacrifice works unless you start taxing employer pension contributions which just opens another can of worms.

It's just an agreement where your employer pays you X less and pays X more into your pension. If salary sacrifice is abolished why can't I negotiate these terms myself directly with my employer and get to the same end result?

It could be as simple as the fact you are receiving higher pension contributions and a lower salary than your colleague doing the same job, which would then be unlawful.

I am not an employment law specialist, but how could this be unlawful?

We have many employees paid different salaries for doing the same job, and every employee that pays AVC's into their pension is receiving higher pension contributions and a lower salary? Are you saying if someone chooses to pay more, that they can't unless everyone else does?

We also have people doing the same job in different pension schemes with different contribution levels, as do many other companies I am aware of?

This is negotiated at the time of employment and during pay reviews etc. If I get a 3% rise and my better performing collegaue receives 5% is this unlawful?

 

AVCs are not relevant as they are employee contributions. We are talking about employer contributions which is what happens in salary sacrifice where an employee gives up some salary in exchange for higher employer pension contributions.

Yes, I accept that people can be paid different amounts for doing the same job, so they would have to look at employer contributions as a percentage - if they made salary sacrifice unlawful, a colleague receiving a different percentage employer contribution than another comparable colleague in the same pension scheme could be seen as an indication of unlawful salary sacrifice, unless the employer could justify the differing treatment.

vacheron

NedS said:

vacheron said:

NedS said:

Gary1984 said:

I just don't see how abolishing salary sacrifice works unless you start taxing employer pension contributions which just opens another can of worms.

It's just an agreement where your employer pays you X less and pays X more into your pension. If salary sacrifice is abolished why can't I negotiate these terms myself directly with my employer and get to the same end result?

It could be as simple as the fact you are receiving higher pension contributions and a lower salary than your colleague doing the same job, which would then be unlawful.

I am not an employment law specialist, but how could this be unlawful?

We have many employees paid different salaries for doing the same job, and every employee that pays AVC's into their pension is receiving higher pension contributions and a lower salary? Are you saying if someone chooses to pay more, that they can't unless everyone else does?

We also have people doing the same job in different pension schemes with different contribution levels, as do many other companies I am aware of?

This is negotiated at the time of employment and during pay reviews etc. If I get a 3% rise and my better performing collegaue receives 5% is this unlawful?

 

AVCs are not relevant as they are employee contributions. We are talking about employer contributions which is what happens in salary sacrifice where an employee gives up some salary in exchange for higher employer pension contributions.

Apologies, I was referring to "AVC's" in a salary sacrifice sense, i.e. where an employee voluntarily offers to give up a larger percentage of their salary in return for higher employer pension contributions. 

In these cases the employee can recieve additional employer contributions for doing so (for example in my case my employer will add 25% of their employer NI saving to the employees pension contribution for standard (matched) contributions, but they will give 100% of their NI saving (13.8%) to the employees pension in the case of any additional contributions they request).

Our employees can also choose whether or not they wish to contribute via SalSac or conventional methods, each of which have a different degree of benefit, which sounded similar to the "individual to employer" negotiation which @Gary1984 was proposing. 

michaels

NedS said:

vacheron said:

NedS said:

Gary1984 said:

I just don't see how abolishing salary sacrifice works unless you start taxing employer pension contributions which just opens another can of worms.

It's just an agreement where your employer pays you X less and pays X more into your pension. If salary sacrifice is abolished why can't I negotiate these terms myself directly with my employer and get to the same end result?

It could be as simple as the fact you are receiving higher pension contributions and a lower salary than your colleague doing the same job, which would then be unlawful.

I am not an employment law specialist, but how could this be unlawful?

We have many employees paid different salaries for doing the same job, and every employee that pays AVC's into their pension is receiving higher pension contributions and a lower salary? Are you saying if someone chooses to pay more, that they can't unless everyone else does?

We also have people doing the same job in different pension schemes with different contribution levels, as do many other companies I am aware of?

This is negotiated at the time of employment and during pay reviews etc. If I get a 3% rise and my better performing collegaue receives 5% is this unlawful?

 

AVCs are not relevant as they are employee contributions. We are talking about employer contributions which is what happens in salary sacrifice where an employee gives up some salary in exchange for higher employer pension contributions.

Yes, I accept that people can be paid different amounts for doing the same job, so they would have to look at employer contributions as a percentage - if they made salary sacrifice unlawful, a colleague receiving a different percentage employer contribution than another comparable colleague in the same pension scheme could be seen as an indication of unlawful salary sacrifice, unless the employer could justify the differing treatment.

But different employers make different contributions, those made towards DB pensions can be huge and may vary between years depending on fund performance.  Unless every employer pays the same percentage contribution for every employee then how can it be decided that employee A who has an agreed remuneration package that is 85% salary and 15% pension is getting sal sac whereas employee B for whom it is 87% vs 13% is not?

Why not just ban all employer contributions including DB and then let the employee decide on their provision then no NI can be avoided - anything else sounds arbitrary to me.

Steve_666_

"Yes, I accept that people can be paid different amounts for doing the same job, so they would have to look at employer contributions as a percentage - if they made salary sacrifice unlawful, a colleague receiving a different percentage employer contribution than another comparable colleague in the same pension scheme could be seen as an indication of unlawful salary sacrifice, unless the employer could justify the differing treatment."

When you join a company, the offer could be 2K per CM as salary, and 2K in a pension, how would that be unlawful?

NedS

Steve_666_ said:

"Yes, I accept that people can be paid different amounts for doing the same job, so they would have to look at employer contributions as a percentage - if they made salary sacrifice unlawful, a colleague receiving a different percentage employer contribution than another comparable colleague in the same pension scheme could be seen as an indication of unlawful salary sacrifice, unless the employer could justify the differing treatment."

When you join a company, the offer could be 2K per CM as salary, and 2K in a pension, how would that be unlawful?

It wouldn't as long as the company are consistent in offering a pension scheme with 100% employer contributions to all their employees - but I'm guessing many employees would prefer £4k/month salary and a 5% employer pension contribution.

Otherwise, it would clearly constitute an attempt to circumvent salary sacrifice rules and be considered tax evasion.

Every time banning salary sacrifice is mentioned, people keep saying it would be impossible to implement whereas to me it seems pretty simple.

Even DB pensions are not an issue - in the CS, the employer currently pays 27.1% for everyone. It's consistent across the board, for all members of the scheme. It's no different to the example above. People have the choice of working for an employer such as the CS on a lower salary with a higher pension, or they can go work in the private sector for a higher salary and lower pension. Or they can go work for the mythical employer above offering 100% employer contributions. The point is there is no individual sacrificing to avoid employer and employee NI conts as that would be unlawful.

MK62

[Deleted User] said:

It would be easy to stop salary sacrifice schemes working in one sentence in a Finance Act: "Section 308 Income Tax (Earnings and Pensions) Act 2003 (exemption of contributions to registered pension scheme) is repealed with effect from [date]."

It's the NI avoidance which is the "issue" with salary sacrifice schemes.......though personally I don't believe it's too difficult and complex an issue to deal with if government had the will - there are several options they could use.
Personally I think removing both the incentive to operate such a scheme from the employer and any advantage gained from such a scheme from employees, would be the way to go rather than trying to outlaw the practice.......

For the record, I believe such schemes, in their current form, are fundamentally unfair to those without the option to use such a scheme, and their curtailment could raise significant revenue.........however I also have little faith that there is much political will to do anything about it.