Pensions escape salary sacrifice clampdown

Philip Hammond 620px

Pension contributions will not be included in new rules clamping down on the usage of salary sacrifice schemes, the Chancellor has announced in the Autumn Statement.

From April 2017, those paying in to benefits in kind schemes “will pay the same tax as everyone else,” Philip Hammond said.

Employer pension contributions, along with childcare and cycling, will be exempt however.

North-east financial planning firm Rutherford Wilkinson operations director Trevor Clark says: “Whilst the Chancellor has announced restrictions to the usage of salary sacrifice, the core schemes of pension contributions, child care and cycle to work have survived which is positive, not negative, news.

“These are key benefits that can truly make a difference to someone’s life, and at the same time save on both the employees’ and employer’s National Insurance bill. Surely it was never the intention of any government to allow tax relief on excessive benefits in kind provided by employers and this just mops that up without withdrawing its use for the more important schemes which was threatened at one stage.”

Supporting documents to the Statement confirm pension advice will also be excluded from the new rules.

The Treasury expects to gain £85m in revenue from the change next year, rising to £260m by 2021-22.

The estimates makes allowances for behavioural changes from both employers and employees.

The Treasury says: “For example, employees may stop using salary sacrifice or employers may cease to operate the salary sacrifice arrangements.”