The Office for Budget Responsibility has revealed major changes to pension tax rules in a document published "in error" ahead of the Budget. Salary-sacrificed pension contributions above £2,000 will lose their national insurance exemption from April 2029.
The OBR document outlined how the new policy will fundamentally reshape pension contributions. Salary-sacrificed amounts exceeding the annual threshold will be treated as ordinary employee pension contributions and become subject to both employer and employee national insurance contributions.
The tax change is projected to generate substantial revenue. The OBR estimates the policy will raise £4.7 billion in 2029/30 and £2.6 billion in 2030/31.
How the system will work
The document explained the mechanism behind the change. "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," the OBR stated.
The premature publication provides an early glimpse into Budget measures. The document's accidental release has exposed planned changes months before their intended implementation date.
Note: This article was created with Artificial Intelligence (AI).
