Pensions LIVE: Salary sacrifice changes in Budget 2025 spark anger and confusion
Today, the Chancellor announced budget changes that could have lasting impacts on pensioners across the UK. The adjustments to the salary sacrifice scheme are drawing significant backlash, particularly among those in lower income brackets. These developments come as the government aims to balance fiscal pressures while undertaking pension reforms.
The changes outlined in the budget reveal that lower-paid employees will face an 8% reduction in National Insurance contribution relief, while higher earners will see a much smaller effect of only 2%. This discrepancy means that low-income workers will feel the financial strain disproportionately. Louise Jenkins, Managing Director and Head of Reward and Employment Tax at Alvarez & Marsal Tax, commented on this issue, stating, “Lower-paid employees stand to lose relief at 8% employee NIC, while higher earners will lose just 2%, meaning the impact is proportionally greater for those on lower incomes. If the Chancellor is serious about ensuring those with the broadest shoulders bear the greatest burden, this distortion will need to be addressed.”
The response from the public and analysts has indicated confusion and concern over how these changes will be actualized and their broader implications. Key stakeholders in the pension sector are expected to engage further with the government to address these disparities and potentially advocate for a more equitable approach to the proposed reforms. The details surrounding implementation remain unclear, but the fallout from the budget announcement is already evident.