If the government were to introduce a £2,000 threshold on salary sacrifice for pension contributions, 31% of businesses would reduce their contributions to an employee’s pension, and 45% would reduce other employee benefits and services.1
The ABI and the Reward and Employee Benefits Association (REBA) are warning the government that this would place additional strain on businesses and push millions of people into poorer retirements.
REBA, which represents nearly 2,000 of Britain’s largest employers, surveyed business decision makers representing over 1.5 million employees about their likely reaction to a Budget announcement capping salary sacrifice for pension contributions.2
An overwhelming 99% of businesses said their organisation would be affected by the cap, with 70% saying it would increase their administrative burden.
Further, a third (34%) of businesses expect the change would make it difficult for them to attract and retain talent.
With earlier ABI research finding 38% of savers would contribute less to their pension if a salary sacrifice cap were introduced, the policy threatens a double hit to pension savers, with lower employer support and reduced personal saving.3
The industry has long-warned that we’re ‘sleep-walking’ into a retirement crisis. If the Government goes ahead with suggestions to cap salary sacrifice, then we’re no longer sleep-walking, we’re speed-walking. These types of short-term revenue raisers put the long-term security of people’s futures at risk. In the government’s own words, ‘we are currently on course for tomorrow’s pensioners to be poorer than today’s’. In this fragile situation, we should be seeing measures which encourage saving, rather than the opposite.
Director of Policy, Long-Term Savings at the ABI
Employers are key to enabling millions of people to save for a pension, taking away a huge burden for the State. Many are willing to do this, and to go above and beyond minimum contributions, to help employees achieve a pension that is adequate to live on in old age. If salary sacrifice is capped to £2,000, National Insurance Contribution relief is reduced - NICs relief that is frequently used to support and encourage workplace pensions saving. Anything that undermines employees saving adequately for their future needs to be stopped.
Co-founder & Director o REBA
For more information, please contact press_office@abi.org.uk.