UK Government to Reform Salary Sacrifice for Pensions with £2,000 Cap

UK Pensions Minister Torsten Bell announced that reform of salary sacrifice arrangements is necessary due to rapidly increasing costs, projected to reach £8 billion annually by 2020, a figure comparable to the UK's spending on the Royal Air Force. The growth in salary sacrifice contributions is particularly pronounced among higher earners, with contributions from additional rate taxpayers tripling since 2017.

The government plans to implement a £2,000 cap on National Insurance relief for pension salary sacrifice, allowing businesses three years to adjust. Bell argued that capping salary sacrifice would not improve overall pension savings, citing past declines in private sector pension participation. Opposition emerged from Richard Fuller, shadow chief secretary to the treasury, who criticized the reform as detrimental to private sector pension contributions and labeled it an anti-savings measure.