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HMRC considers ‘hypothetical’ pensions salary sacrifice options

HMRC has published the findings of research which looked at employer reactions to several hypothetical changes to the operation of salary sacrifice arrangements for people scheme contributions.

HMRC has published the outcome of research it commissioned into the impact of salary sacrifice on pension schemes, including looking at reasons why employers take up or, alternatively choose not to offer, a salary sacrifice arrangement. Key points cover reactions to the following three hypothetical scenarios, each of which would represent a change to current arrangements:

1. •

   removal of the NICs exemption on amounts sacrificed. For an employee with annual salary of £35,000 who sacrifices 5%, with a matching employer contribution, this would result in an additional £242 for the employer and £210 for the employee per year (based on rates at the time). The report notes that employer reactions ‘were broadly negative’

2. •

   removal of the NICs exemption for both employer and employee, AND removal of the income tax exemption for employees. This would be a significant policy