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New salary sacrifice rules are coming in the Labour Party Autumn Budget, it has been warned. The Labour Party Chancellor Rachel Reeves will reportedly target salary sacrifice pension arrangements. The Chancellor intends to establish a £2,000 annual limit for these schemes, with National Insurance contributions becoming payable on amounts exceeding this threshold. Under the proposed changes, contributions exceeding £2,000 annually would attract National Insurance at standard rates - eight per cent for earnings below £50,270 and two per cent for income above that level. READ MORE Drivers face new monitoring device in cars under UK pay-per-mile tax Pensions expert Steve Webb from consultancy firm LCP, who used to be the Conservative Party and Liberal Democrats coalition government's pensions minister, has spoken out. "Salary sacrifice is used as a way of reducing the cost to employers of providing decent pensions," Mr Webb shared. "At a time when millions are not saving enough, this is a backward step," he added. Eamonn Prendergast, Chartered Financial Adviser at Bromley-based Palantir Financial Planning Ltd, said: “A tax raid on salary sacrifice is a tax on working people, plain and simple. These schemes aren’t loopholes, they’re lifelines for millions who sensibly save for their future. "Cutting back on them would hit ordinary workers the hardest, reducing take-home pay and discouraging pension saving at a time when the government should be doing the opposite. Instead of punishing prudence, ministers should be rewarding it because a country that taxes saving is a country that forgets how to grow.” Rob Mansfield, Independent Financial Adviser at Rootes Wealth Management in Tonbridge, said the government was “shooting itself in the foot”. He added: “Salary sacrifice is a great tool for the companies that allow it. It’s particularly convenient for higher-rate taxpayers as full tax relief is given automatically and not enough people claim tax relief through their self-assessments. "One of the Budget rumours is that National Insurance may be cut, which would erode the benefits naturally. It’s in the government’s interest for us all to save properly for retirement, so it’s odd that every Budget they damage confidence by faffing around with pensions.” Earlier this week, PensionBee's chief business officer Lisa Picardo highlighted salary sacrifice as being an "efficient way to boost pension contributions" and criticised a potential cap. She shared: "It would disincentivise companies who provide workplace pensions and send the wrong message to millions of basic rate taxpayers trying to save more for their future."
