[UK] Salary sacrifice schemes under threat after announcement of yearly cap

In the UK, new research has revealed that a significant number of companies are considering scrapping salary sacrifice schemes over dramatic changes to pension saving rules. From April 2029, there will be a new £2,000 yearly cap on how much money an individual can save into their pension through salary sacrifice schemes, Yahoo reports.

According to research from the Standard Life Centre for the Future of Retirement, two in five (39 per cent) business leaders who currently offer salary or bonus sacrifice schemes stated that they are less likely to provide the scheme in future.

Commenting on the findings, Catherine Foot - Director of the Standard Life Centre for the Future of Retirement - said, “The UK has a widespread under-saving problem.

"Current minimum workplace pension auto-enrolment levels are insufficient, with 15 million people currently heading for financial insecurity in retirement.

"The cap on salary sacrifice schemes will end up worsening this crisis by creating additional cost barriers that disincentivise employers from offering the scheme, with significant implications for their employees’ ability to save.

“With the National Insurance Contributions Bill receiving Royal Assent, an opportunity has been missed to consider the effects of the changes on employer incentives to offer the scheme, as well as the extra costs for employees and employers.

"Our analysis finds that a lower earner is most likely to be affected not directly, but indirectly by the knock-on consequences that this has for businesses, while middle and high earners will have a double whammy – impacted by extra costs themselves, along with high payroll costs for the employer.

“Ideally, Government would have waited to hear the initial evidence from the Pensions Commission, which will soon set out the evidence on the scale and nature of under-saving before pressing ahead with this change.”

Gail Izat - Managing Director for Workplace and Retail Intermediary at Standard Life - said, “Employers want to support their employees to save more and improve their financial prospects in retirement, as evidenced by the significant proportion who currently offer salary sacrifice schemes to their workforces.

"But businesses are struggling with difficult economic headwinds and increased costs across the board, meaning that further costs or administrative barriers are a huge disincentive to continuing to offer these. They also need further detail on implementing these changes, as complex and unclear processes may further discourage them offering salary sacrifice.

“The changes will likely lead to many employees saving less over the next few decades than they would otherwise, with salary sacrifice currently one of the most straightforward and most effective ways for people to boost their pension.”

Source: Yahoo

(Quotes via original reporting)

In the UK, new research has revealed that a significant number of companies are considering scrapping salary sacrifice schemes over dramatic changes to pension saving rules. From April 2029, there will be a new £2,000 yearly cap on how much money an individual can save into their pension through salary sacrifice schemes, Yahoo reports.

According to research from the Standard Life Centre for the Future of Retirement, two in five (39 per cent) business leaders who currently offer salary or bonus sacrifice schemes stated that they are less likely to provide the scheme in future.

Commenting on the findings, Catherine Foot - Director of the Standard Life Centre for the Future of Retirement - said, “The UK has a widespread under-saving problem.

"Current minimum workplace pension auto-enrolment levels are insufficient, with 15 million people currently heading for financial insecurity in retirement.

"The cap on salary sacrifice schemes will end up worsening this crisis by creating additional cost barriers that disincentivise employers from offering the scheme, with significant implications for their employees’ ability to save.

“With the National Insurance Contributions Bill receiving Royal Assent, an opportunity has been missed to consider the effects of the changes on employer incentives to offer the scheme, as well as the extra costs for employees and employers.

"Our analysis finds that a lower earner is most likely to be affected not directly, but indirectly by the knock-on consequences that this has for businesses, while middle and high earners will have a double whammy – impacted by extra costs themselves, along with high payroll costs for the employer.

“Ideally, Government would have waited to hear the initial evidence from the Pensions Commission, which will soon set out the evidence on the scale and nature of under-saving before pressing ahead with this change.”

Gail Izat - Managing Director for Workplace and Retail Intermediary at Standard Life - said, “Employers want to support their employees to save more and improve their financial prospects in retirement, as evidenced by the significant proportion who currently offer salary sacrifice schemes to their workforces.

"But businesses are struggling with difficult economic headwinds and increased costs across the board, meaning that further costs or administrative barriers are a huge disincentive to continuing to offer these. They also need further detail on implementing these changes, as complex and unclear processes may further discourage them offering salary sacrifice.

“The changes will likely lead to many employees saving less over the next few decades than they would otherwise, with salary sacrifice currently one of the most straightforward and most effective ways for people to boost their pension.”

Source: Yahoo

(Quotes via original reporting)