Ending employer NI relief, especially if only for private sector, would be disastrous
- Ending National Insurance relief only for private sector employer pension contributions is unjustifiable.
- If public sector schemes can’t cope with ending this relief, it is a clear indication that private sector schemes will struggle and this change should not happen at all.
- Damaging private sector workers, and their employers, while forcing them to pay for even better public sector pensions, would be a serious mistake.
- Abolishing National Insurance relief for employer pension contributions may sound attractive in theory, but in practice it may up-end auto-enrolment – it needs careful consideration, preparation and planning and cannot be done at a stroke.
There have been strong hints that the Chancellor wants to abolish National Insurance relief for employer pension contributions in next week’s Budget. This would create havoc for auto-enrolment.
Continuing NI relief for public sector employers and not private sector contributions seems indefensible. The latest rumour is that, presumably having recognised that this will be a big blow for public sector pension schemes, the Government will only impose these extra burdens on private sector employers, while making sure public sector employers and workers still receive the relief.
Imposing National Insurance on pension contributions sounds attractive in theory, but in practice it would be a nightmare. All auto-enrolment salary sacrifice arrangements would need to be adjusted and I strongly advise the Chancellor against this as the costs of administration and impact on workers’ take home pay seems to have been inadequately appreciated.
Such a radical change to a policy which has been embedded in pension schemes for years cannot happen at a stroke. Any such major change to pension contribution rules, would require significant and lengthy consultation, as well as significant lead times to get the administration in place and to ensure workers do not suffer cuts in take home pay and pension contributions as a result of ending salary sacrifice arrangements. Many employers and workers have reached special agreements to accommodate the reliefs given on pension contributions. Workers’ salaries have been renegotiated or adjusted to take account of this relief. The complexity and time taken to make the necessary changes should not be underestimated.
Even more so if this is only applied to private sector employers. Exempting the public sector schemes, by forcing all taxpayers to pay the employer Ni contributions for these already hugely generous pension arrangements, is patently unfair on private sector employers and workers and further embeds inequalities in pension provision for the UK workforce.
If public sector employers cannot cope, private sector employers will struggle too and workers will ultimately lose out. If the public sector cannot cope with imposing NI contributions on pensions then that is a clear indication that all employers would also struggle and this change should not be imposed at all.
This kind of change would cause havoc for UK pensions and derail the success of auto-enrolment. Because of the prevalence of salary sacrifice arrangements in auto enrolment pensions across all employers, and the widespread problems already known in pensions administration due to excessively complex rules, any such sudden significant change in the Budget will create havoc for many employer schemes and would be seriously ill-advised.
One thought on “Ending employer NI relief, especially if only for private sector, would be disastrous”
The unsustainable generous public sector pensions against the derisory private sector pensions pensions is a national scandal.. Many private workers only get a 3%contribution from their employer and finish up with a unliveable pension, yet they pay for public sector pensions 3,4, or 5 times bigger. This cannot continue.