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Steve Webb: Treasury could target salary sacrifice


Former pensions minister Steve Webb says salary sacrifice could be in the Treasury’s sights ahead of the Conservative Government’s first Budget in July.

Speaking to Money Marketing, Webb, who lost his Thornbury & Yate constituency seat during the general election, says the pledge from the Government not to raise tax rates leaves ministers with little wriggle room to raise extra money to fund spending pledges.

He says: “I certainly think salary sacrifice could go because the sums involved are significant. The Conservatives have said they aren’t going to raise tax rates, so they have to raise some serious money from somewhere.

“You could certainly see action in that space in the Budget. I have never understood why governments allowed it in the first place.”

Webb also reveals automatic enrolment for smaller businesses was under “serious” threat during his tenure. The reforms were eventually delayed for firms employing fewer than 50 people until after the May general election.

Webb says: “The reason that nobody who employs fewer than 50 people has been enrolled until June 2015 is because the election was in May 2015. We had to battle to keep auto-enrolment going and the price for that was to give the next government the chance to stop it before we got to the small firms.

“There were serious discussions about exempting smaller employers altogether. We had the one-in-one-out policy on deregulation and the fragility of the economic to think about in 2012, so there was an obsessive focus on growth.”

Webb also plays down suggestions that a drawdown charge cap is necessary to protect savers in the wake of the pension freedoms.

He says: “We certainly shouldn’t have a charge cap yet because we need innovation in the market, and frankly I don’t think we have a basis for setting a cap.

“There will be a lot of tough talk but I expect the focus to be on regulatory process rather than price.”



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There are 7 comments at the moment, we would love to hear your opinion too.

  1. Salary sacrifice is the obvious way around the Tory manifesto promise on tapering annual allowance for top earners, so would be looked at for this reason alone.

  2. Alistair Cunningham 10th June 2015 at 2:22 pm

    @Phil – not obvious, they fixed that with anti-forestalling last time round, by adding back in ee and er contributions.

  3. John Shackleton 10th June 2015 at 2:23 pm

    Yet someone who negotiates terms on joining a company for a lower salary and a large employer contribution will be OK. As will anyone who in in a DB scheme with high employer commitment.

    Too many inequalities to be fair on all people here……and Ros Altmann knows and understands that. I hope she stays true to her beliefs!!

  4. Julian Stevens 10th June 2015 at 2:27 pm

    It may be difficult to police a private SS arrangement. All the employer has to say is that the terms of the employee’s employment include, in addition to an agreed salary/bonus/company car and other employee benefits package, an agreed contribution to a retirement savings scheme of the employee’s choice and that’s the way it’s been for the past several years. After all, the employer’s costs of an AE scheme will, ultimately, be reflected in the company’s overall payroll costs. From where else will the money come? What does Mr Webb (the ex-Pensions Minister, remember) suggest ~ making all employer RB contributions NI’able?

  5. A non-contributory Defined Benefits scheme is a form of salary sacrifice, so along with a more favourable LTA calculation this creates an even wider divide. How they police this who knows? As commented above, if the contract is changed to employer contributions only there is no sacrifice.

    One for the employment law specialists.

  6. If you work for a small flexible firm whop the hell can the Gestapo prove Sal Sacrifice?

    OK Fred Review time. You can have a £5k raise or £2.5 cash and £2.5 pension. All verbal nothing in writing. (And of course none of that AE rubbish).

  7. They should exempt small firms. Even a family business has to go through the rigmarole when they can decide what is PAYE or dividend and sort out their own pension. It’s just another paper trail for no benefit.

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