A 1% rise in the amount of National Insurance paid by all employers, employees and self-employed peo...
A 1% rise in the amount of National Insurance paid by all employers, employees and self-employed people may boost interest in salary sacrifice arrangements for company pensions, according to pensions experts, as employers will be keen to keep NI costs from spiraling.
Employers are currently required to pay 12.8% of each employee's salary in NI contributions - employers paying into a final salary or money purchase pay lower rates - while employees pay 10%, so rates will move up to 13.8% and 11% respectively from next April.
Employers who are interested in providing employees with a retirement fund may be tempted to put money into salary sacrifice, says Alisdair Buchanan, head of communications at Scottish Life, because it could reduce their liabilities considerably.
"National Insurance changes are likely to make a marginal difference and it makes it slightly more attractive than previously, because by sacrificing the level of salary and putting money into a pension plan, you are reducing the NI exposure of both the employer and employee," says Buchanan.
"There has always been a place for salary sacrifice, but at the same time it will not deter employers from contributing to pension schemes, it just puts up costs, albeit they are relatively small in comparison to the other changes taking place in the pensions industry."
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