Millions could be hit by salary sacrifice changes

AROUND 3.3 million pension savers are on course to be hit by salary sacrifice changes announced in the Budget, HM Revenue and Customs (HMRC) figures indicate.

- VICKY SHAW

Guidance published online by HMRC about the changes said an estimated 7.7 million employees currently use salary sacrifice to make pension contributions.

Of these, 3.3 million sacrifice more than £2,000 of salary or bonuses.

Changes announced in the Budget will mean salary-sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from national insurance (NI) from April 2029.

Contributions above £2,000 will be treated as ordinary employee pension contributions in the tax system and subject to NI contributions.

Employers may offer salary sacrifice as part of their pension scheme as a tax-efficient way to help workers boost their pots.

The schemes enable people to maintain their take-home pay, as people end up paying lower NI contributions.

The announcement in the Budget has been criticised by pensions industry bodies, who have argued many people are already thought to be heading for a tough time financially in later life.