Key pension scheme 90% of employers believe Reeves will target in Budget | Personal Finance | Finance

According to a new survey, more than 90% of employers think that Rachel Reeves will limit retirement salary sacrifice plans in the autumn budget next autumn budget.

The survey conducted by Censuswide for BDO believed that almost half of the participants (49%) of the C-Suite participants were “very likely ,, while 45% thought that they were“ very likely .. While only 6% have an equal chance in both ways, less than 1% thinks that restrictions are not likely. The findings follow a HMRC questionnaire in May 2025, which claims that pension plans may be in the reform landscapes of the chancellery. Caroline Harwood, Chairman of the Employment Tax at BDO, accounting and business consultancy firm, said: “It is clear that employers from our survey findings have prepared themselves for reform.

“Indeed, HMRC’s research at the beginning of this year showed that the changes in retirement sacrifice plans are actively evaluated.”

In the salary sacrifice plans, employees prevent some of their salaries and a portion of the employer as a more retirement contribution to pensions. This means that the official gross salary of the employee is reduced by the amount they sacrifice.

This arrangement provides a national insurance contribution (NIC) savings for both the employer and the employee, because salary and employer contributions are exempt from both income tax and NIC.

HMRC’s research examined three scenarios:

• One of the scenario has removed the NIC exemption and caused the employer and employee NIC charges.
• The second scenario removed NIC exemption for both employers and employees and income tax exemption for employees with sacrificed salary.
• The third scenario has removed the NIC exemption, but only sacrificed on the threshold of £ 2,000 only by salary.

Employers thought that all three scenarios could affect the morale of employees, but may be more acceptable because of the perceived justice in the third scenario.

Harwood stated that pension tax reductions are “costly .. The latest figures show that the cost of NIC tax cuts obtained from contributions to registered pension plans reached $ 23.5 billion in 2023/24. Meanwhile, the cost of income tax reduction for registered pension plans reached £ 28.5 billion in the same period.

Har The difficulty for the government is how to restrict relaxation in pension without encouraging people to save enough for their future.

“An approach may be to tell the total salary of the total salary sacrificed for all types of benefit of the NIC exemption.

“Another, perhaps a simpler option is to keep the salary sacrifice system as it is, but it will be to apply a simple tax on the pension fund values. This can be done by adding a small percentage to annual fees.

“Regardless of the way the government has chosen, some changes in the retirement taxation in the budget seem to be very likely.”