Employers NI on pension contributions?

hallmark

I'm starting to think this is one of the more likely changes on October 30th.   Of all the measures proposed, this would raise a lot (estimates of £16bn a year).  It can be framed as not breaking any manifesto pledges.  And the worst indirectly affected would be high earners.  And it's pretty stealthy compared to other measures, far less instant pain.

If Reeves actually wants to find £20bn this might be one of the more politically feasiable ways.

Views? Anybody more financially clued up than I see real-world problems with implementing this? (i.e. ways in which it would affect those people this Govt won't want to be seen to hurt)

double_dutchy

I'm not sure I agree with the thrust of "It can be framed as not breaking any manifesto pledges" - surely it just doesn't break any manifesto pledges?

hallmark

Labour's manifesto included a pledge not to raise NI.  Imposing it on employer pension contributions sticks to the letter of that law whilst clearly increasing the NI that employers (and therefore eventually employees) pay.

so I think I'll stick by how I worded it

Sam_666

Another pointless speculation.
Wait for budget, then talk about changes and impact.

masonic

hallmark said:

Labour's manifesto included a pledge not to raise NI.

Only on working people. "We will ensure taxes on working people are kept as low as possible. Labour will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT."

Raising taxes on employers, such as increasing employer NIC or not giving tax relief to employers for the NIC paid on wages salary sacrificed into pensions would not break this pledge. There's potentially even scope to introduce another rate of income tax in addition to the basic, higher and additional rates, although it would need to be done in such a way to not break the pledge that working people wouldn't be worse off.

Altior

Sam_666 said:

Another pointless speculation.
Wait for budget, then talk about changes and impact.

The whole premise around pre budget kite flying is to judge public reaction to the 'proposals'. So, I'd argue the speculation is not pointless. For example the kite around deleting single person CT discount has received A LOT of negative feedback. There is definitely a chance that if they had flew the kite around cancelling default WFP, it would have at least been moderated. Which now looks like what will happen in the budget. 

There is nothing to be lost around reacting 'vocally' around the various kites, and there is a chance of getting the ideas consigned to the dustbin, or at the very least, ameliorated or postponed. It can also surface the unintended (or intended) consequences. 

What we'll never know is which of them are true kites, and which are constructed by media out of thin air to grab clicks and headlines. 

ZeroSum

There was an article somewhere (think it was guardian) about it whereby they mentioned how much it'd cost the public sector. Problem is, is that public sector pension aren't salary sacrifice so already pay NI on pension contributions for both employee & employer. Shoddy journalism by the author.

hallmark

masonic said:

hallmark said:

Labour's manifesto included a pledge not to raise NI.

Only on working people. "We will ensure taxes on working people are kept as low as possible. Labour will not increase taxes on working people, which is why we will not increase National Insurance, 

Exactly. This can be portrayed as not breaking the pledge. However we all know companies cannot spin these Ni payments out of thin air. They will have to come from somewhere and that somewhere  will be the employees total remuneration. So an increase to employers ni can be framed as not breaking any pledges even though in effect it would very definitely raise the tax take on "hard working people"....

masonic

hallmark said:

masonic said:

hallmark said:

Labour's manifesto included a pledge not to raise NI.

Only on working people. "We will ensure taxes on working people are kept as low as possible. Labour will not increase taxes on working people, which is why we will not increase National Insurance, 

Exactly. This can be portrayed as not breaking the pledge. However we all know companies cannot spin these Ni payments out of thin air. They will have to come from somewhere and that somewhere  will be the employees total remuneration. So an increase to employers ni can be framed as not breaking any pledges even though in effect it would very definitely raise the tax take on "hard working people"....

Well arguably any increase anywhere could be considered to have some consequential effect. Inflation alone will result in people paying more VAT, and we can all be pretty sure that inflation over the next 5 years will be non-zero. When reading a pledge like this, every word is important, and what is not said is equally important. The first sentence pledges to keep taxes on working people as low as possible, not saying they what is paid won't rise overall. The second sentence states Labour will not increase taxes on working people, going on to list explicit taxes they consider to be "taxes on working people". Employer NIC would not be considered in any reasonable interpretation to be a tax on working people - it is a tax on employers. They do not state that they will indemnify anyone from increased prices or reduced wages as a result of employers, landlords, retailers, etc being charged more tax. It is clear what is there in black and white and what is not. It is dangerous to make assumptions or read between the lines, as you may come away believing something that isn't so.

Having said that, I don't know how many employers do pass on the savings they enjoy from reduced employer NIC on salary sacrificed pension contributions. I know my employer currently pockets that saving, while I enjoy the saving on my own NICs.

hallmark

An excerpt from an FT article on this


Ending the inheritance tax benefits of DC pensions is one widely tipped Budget measure. Charging employers national insurance on staff pension contributions is another.

This passes Ralfe’s test, as public sector employers would be reimbursed for any extra costs. And it just about squeaks around Labour’s manifesto pledge not to raise NI for working people. But raising NI on the pension contributions that private sector companies make for their staff is obviously going to have major consequences for workers in future.

A snap poll by the ABI found that nearly half of employers who currently pay more than the bare minimum into staff pension schemes would reduce their contributions were this to happen.

masonic

hallmark said:

A snap poll by the ABI found that nearly half of employers who currently pay more than the bare minimum into staff pension schemes would reduce their contributions were this to happen.

I suspect rather more of them are willing to say that in an anonymous survey aimed at putting the govt off the idea than actually cut their contributions. However, speculating about this is rather futile as it is a change that us moneysavers could do nothing to prepare for at this point.