National Insurance Contributions
Last month’s autumn statement sent a small ripple of surprise through the pensions industry and the wider business community when the “will he, won’t he” debate about tax cuts concluded with Jeremy Hunt announcing a reduced rate of National Insurance contributions (NIC).
The main rate of Class 1 employee NIC is to be cut from 12% to 10% from 6 January 2024, meaning that a worker earning £35,400 will receive a tax cut in 2024-25 of over £450. The main rate of employer contributions remains unchanged at 13.8%.
The planned cut came after the Chancellor Jeremy Hunt had previously signalled against reducing taxation and he dismissed speculation that it was a move made in preparation for an election next spring.
Impact on pension salary exchange
As we have previously covered in our newsletter, salary exchange (also known as salary sacrifice) is an alternative way for employees to pay their contributions into a workplace pension scheme and is the most tax and NIC efficient way for employees to save for their retirement. It also offers a significant saving to employers.
The proposed change to NIC from January 2024 reduces the potential savings available to employees through salary exchange, but this is still a great option for most workers who will see an increase in their take-home pay next month.
Whether you already use salary exchange for your workplace pension scheme or you are planning to introduce it in future, the new rate of NIC will need to be reflected in any employee communications and presentations. Please get in touch if this is something you would like to discuss further.
The Pension Regulator’s response to the autumn statement
The Pensions Regulator (TPR) has said it welcomed the measures contained in the autumn statement to “enhance the quality of the pensions industry, support innovation and ensure savers are protected and get good value”.
Among the measures it highlighted were the next steps for the joint Department for Work and Pensions (DWP), Financial Conduct Authority (FCA) and TPR value for money framework, the recommendations following a review of master trust authorisation and supervision regime and what it said was “helping the pensions industry to provide suitable products and guidance to savers accessing their pension savings”.
Louise Davey, TPR’s Interim Director of Regulatory Policy, Analysis and Advice, said: “We welcome these important policies which will help create a pensions landscape made up of fewer, larger, schemes which are well-governed and offer savers good value for money.”
New pensions minister
Paul Maynard, the MP for Blackpool North and Cleveleys was appointed Parliamentary Under Secretary of State at the Department for Work and Pensions last month in the latest ministerial reshuffle by Prime Minister Rishi Sunak.
Replacing Laura Trott in the role of pensions minister – a role she held for a little over 12 months – he has previously held posts in the Department for Transport and Ministry of Justice as well as serving as a government whip in the Treasury.
Before entering Parliament for the Lancashire constituency, he worked as a political adviser and speechwriter. As a career politician and representing the constituency of Blackpool, will his appointment to this new role be a roller-coaster ride for the pensions industry?
For further information , contact David Hodgson on 01423 229029 or by email to david.hodgson@mhmtrustees.co.uk.
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