£2000 NI relief cap on pension salary sacrifice from April 2029 (confirmed)

hugheskevi

GunJack said:

hugheskevi said:

BlackKnightMonty said:

I would say current State Pensioners get an absolute steal of a deal. Triple locked SP paid at out at a relatively young age. You’ve never had it so good.

Don't forget the self-employed and long-serving public sector workers, who were the big winners of the change to the new State Pension in 2016. 

Whereas previously they would probably have only received Basic State Pension, they now benefit from full State Pension. Combined with Triple Lock from 2011, that has been a big increase in the amount of State Pension they expected to receive.

Err....not just public sector, but anyone who had a company pension that was contracted-out of serps/s2p surely?? 

Possibly, but by 2016 contracted-out private sector DB schemes were very thin on the ground outside the public sector, and had been for some time. So even those who had been contracted out in the 1990s and 2000s in the private sector were likely to have a reasonable amount of contracted-in service and so have accrued S2P in particular (possibly SERPS, but that was pre-2002 and many of the private sector schemes had closed to new joiners by then but remained open to new accrual for existing staff).

Realistically, few retiring after about 2020 working in the private sector would have spent their entire career in a DB scheme, and DC contracting out ended in 2012. So the only folks likely to have spent an entire career contracted out into a DB scheme are those working in the public sector and maybe some in the types of job that lie between the public and private sector, eg, Universities, BBC, Tube drivers, etc, and so retained DB schemes long after they became almost extinct in the pure private sector.

SnowMan

Good article on the potential capping of salary sacrifice here

https://www.actuarialpost.co.uk/article/preparing-for-a-budget-clampdown-on-pension-salary-sacrifice-25926.htm

Grumpy_chap

I am really not sure how a cap at £2k on SS would actually work in practice.

How would a non-contributory pension scheme be assessed?
What about a regular employer scheme match at, say, 10% employer and 10% employee?  That can easily see an employer contribution at more than £2k above statutory auto-enrolment levels.
Would the rules have to be that any employer contribution more than £2k above auto-enrolment is subject to the NI incurred as though this was paid as regular salary (but not income tax)?

Cobbler_tone

Grumpy_chap said:

I am really not sure how a cap at £2k on SS would actually work in practice.

How would a non-contributory pension scheme be assessed?
What about a regular employer scheme match at, say, 10% employer and 10% employee?  That can easily see an employer contribution at more than £2k above statutory auto-enrolment levels.
Would the rules have to be that any employer contribution more than £2k above auto-enrolment is subject to the NI incurred as though this was paid as regular salary (but not income tax)?

That is what I am interested to see. My company contributions are £7,800 a year before I add mine. If the employers are liable for increased NI charges (on top of the recent increases) I can see some companies dropping their contribution levels.
As the article covers, it is far from being a simple change to implement.

westv

Cobbler_tone said:

Grumpy_chap said:

I am really not sure how a cap at £2k on SS would actually work in practice.

How would a non-contributory pension scheme be assessed?
What about a regular employer scheme match at, say, 10% employer and 10% employee?  That can easily see an employer contribution at more than £2k above statutory auto-enrolment levels.
Would the rules have to be that any employer contribution more than £2k above auto-enrolment is subject to the NI incurred as though this was paid as regular salary (but not income tax)?

That is what I am interested to see. My company contributions are £7,800 a year before I add mine. If the employers are liable for increased NI charges (on top of the recent increases) I can see some companies dropping their contribution levels.
As the article covers, it is far from being a simple change to implement.

It's the amount you sacrifice which would be affected. I currently sacrifice 30%.

I don't see anything happening myself

zagfles

Grumpy_chap said:

I am really not sure how a cap at £2k on SS would actually work in practice.

How would a non-contributory pension scheme be assessed?
What about a regular employer scheme match at, say, 10% employer and 10% employee?  That can easily see an employer contribution at more than £2k above statutory auto-enrolment levels.
Would the rules have to be that any employer contribution more than £2k above auto-enrolment is subject to the NI incurred as though this was paid as regular salary (but not income tax)?

It could work in lots of ways. The article linked above describes one, where it's just sal sac, not employer conts. so non contributory pensions wouldn't be affected, matching conts shouldn't be affected but if the 10% employee cont is sal sac then that would count towards the £2k. 

Capping NI free employer pension conts at a level, either in £ or % of salary, above which NI is charged would be a much fairer option. Then you don't get the ridiculous situation where two people with identical salaries and pension conts are taxed (or NI'ed) differently just because one had a choice of the salary/pension mix and the other didn't. 

Cobbler_tone

westv said:

Cobbler_tone said:

Grumpy_chap said:

I am really not sure how a cap at £2k on SS would actually work in practice.

How would a non-contributory pension scheme be assessed?
What about a regular employer scheme match at, say, 10% employer and 10% employee?  That can easily see an employer contribution at more than £2k above statutory auto-enrolment levels.
Would the rules have to be that any employer contribution more than £2k above auto-enrolment is subject to the NI incurred as though this was paid as regular salary (but not income tax)?

That is what I am interested to see. My company contributions are £7,800 a year before I add mine. If the employers are liable for increased NI charges (on top of the recent increases) I can see some companies dropping their contribution levels.
As the article covers, it is far from being a simple change to implement.

It's the amount you sacrifice which would be affected. I currently sacrifice 30%.

I don't see anything happening myself

I haven't read anything about limits on what you can sacrifice, just NI liability over £2k. My employer currently contributes £7,800 and I £32,500. Assuming the £2k limit will be on mine and the employer unaffected but who knows? We will do this time next week. 

Grumpy_chap

Cobbler_tone said:

I haven't read anything about limits on what you can sacrifice, just NI liability over £2k. My employer currently contributes £7,800 and I £32,500. Assuming the £2k limit will be on mine and the employer unaffected but who knows? We will do this time next week. 

Except, yours is no longer yours but becomes employer contributions.
And yours seems a straightforward case - salaried employee making large pension contributions using the available rules.

A bit more complex for an individual making AVCs or buying extra years in a DB scheme?

What about Umbrella Company employees?

What about owner-Director Ltd Co.?

Grumpy_chap

Given that we all love a budget rumour, and linked with possible NI on SS contributions, the Independent is reporting that NI might be levied on LL's rental income:
https://www.independent.co.uk/money/budget-2025-reeves-tax-changes-personal-finances-b2868064.html

In that event that happens, would rental income then change from "unearned" to "earned" in the context of pensions?  This could actually be a good change for LL's as it would allow pension contributions to be made against that "earned" income.

GunJack

All this talk of adding NI to this, that and the other just smacks of dishonesty on the part of the govt, just put the last 2p cut back on to employees and be done with it.....when it came down from 12 to 10 to 8pct, despite me personally benefitting from those cuts, I did say at the time it was a bad move.