£2,000 cap for salary-sacrificed pension contributions – OBR

Salary-sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from national insurance from April 2029, according to a document published in “error” ahead of the Budget.

The Office for Budget Responsibility (OBR) document said that salary-sacrificed pension contributions above £2,000 would be treated as ordinary employee pension contributions in the tax system and therefore be subject to both employer and employee national insurance contributions.

The document said: “The policy results in an increase in NICs (national insurance contributions) which is estimated to raise £4.7 billion in 2029/30 and £2.6 billion in 2030/31.

“The costing assumes that, in most cases, employee pension contributions above £2,000 that were part of a salary-sacrifice scheme will become subject to employer and employee NICs, either because they move to a standard pension scheme or continue in a salary-sacrifice scheme under the new tax arrangements.”