- The government was defeated five times in the House of Lords last week on amendments to the bill on pension salary sacrifice changes (Source: Hansard | National Insurance Contributions (Employer Pensions Contributions) Bill)
- One amendment has increased the annual cap on employee contributions for full National Insurance relief from £2,000 to £5,000
- Ministers confirmed in the debate that the proposed cap would apply per employment, rather than per individual
- The National Insurance Contributions (Employer Pensions Contributions) Bill will now return to the House of Commons, where further changes may be made to remove these amendments
- With three years to go until changes become live, details of the policy could easily change again
Charlene Young, senior pensions and savings expert at AJ Bell, comments:
“Policy ping pong is in full swing as the bill on pension salary sacrifice changes snakes its way through various key stages to Royal Assent. In one of five defeats for the government at the House of Lords stage, the pension salary sacrifice cap has been increased to £5,000, from the original £2,000 proposed.
“But this is more like the end of the first set than the whole match, as the bill will now travel back and forth between the Houses until both agree. This means that the five amendments currently included could be changed again.
“When the cap was announced, the long lead time caused many to believe that the 2029 changes would never see the light of day. Some signposted the fact that the next general election must be held on or before 15 August 2029, and others pointed to the current administration’s tendency to U-turn on contentious policies.
“The government has rushed through the draft rules well ahead of time to signal its intention to get them into law, and perhaps because they were aware there would be plenty of back and forth between the two Houses.
“Other notable amendments include an exemption for basic rate taxpayers from the £2,000 cap, while another was for any sacrificed contribution above the cap to not be counted as income when working out student loan repayments. The latter amendment certainly feels like it has a better chance of passing, given the upcoming freeze to student loan repayment thresholds and the prime minister’s commitment to look at solutions to help alleviate some of the issues around student loans.”
Notes
The below chart outlines the votes on the amendment to increase the cap to £5,000.
The below chart outlines the votes on the amendment to disregard savings above the cap from being included in the income used for student loan repayment calculations.
