Jessica O'ConnorDetails from the leaked Office for Budget Responsibility (OBR) forecast has sset out plans to end National Insurance (NI) exemptions on the majority of salary-sacrificed pension contributions from April 2029.
According to the document: “Salary-sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from NICs from April 2029.”
Contributions above that level would be treated as standard employee pension payments and become subject to both employer and employee NICs, while ordinary employer contributions remain exempt.
The change is forecast to raise £4.7bn in 2029-30 and £2.6bn in 2030-31.
The OBR says its costing assumes most contributions above £2,000 currently made via salary-sacrifice either migrate into standard schemes or continue under the revised rules.
It notes uncertainty around behavioural responses, with some employers potentially trying to offset the change by adjusting wage growth and increasing employer pension contributions.
However, it cautions that such approaches would be limited by OpRA rules and wider employment considerations.
The forecast also includes a smaller timing effect, estimating that related behavioural changes could “bring forward £0.3 billion of income tax liabilities to 2025-26,” which would unwind over the following two years.
