National Insurance Contributions (Employer Pensions Contributions) Bill

Baroness Altmann Excerpts

Wednesday 4th February 2026 Lords Chamber

[Baroness Altmann (Non-Afl)]

My Lords, first, I need to declare my interests as a non-executive director and a board adviser to pension companies. I understand the Government’s thinking, in theory, about the anomaly, as they probably call it, of national insurance relief, but in practice, this policy will have serious negative impacts. Indeed, I wonder whether it will save anything like the sums expected, as it will have damaging unintended consequences on both pensions and growth.

We seem to have a “push me, pull you” pensions policy, with the DWP setting up a Pensions Commission to review adequacy and improve pensions, while the Treasury increases tax on and the cost of employer pensions, making pensions less attractive and more expensive. This will reduce adequacy and hit growth. It will certainly reduce the take-home pay of a vast number of workers. It is, in effect, a tax on working people, as the noble Lord, Lord Leigh, has said. A rise in the cost of pension provision imposed on employers—but almost exclusively in the private sector—is surely the equivalent of a tax increase on ordinary working people.

If employers are already contributing more than the minimum, their pension costs are bound to rise because of this measure. The likelihood is that they will cut back to the minimum, making pension outcomes worse. The noble Lord, Lord Davies, doubts the scale of this impact. One of the reasons that salary sacrifices have increased so significantly since 2016 is that so many more employers have come into pensions as a result of auto-enrolment. There are hundreds of thousands more which were not there before; if they have advice they are told that it is a no-brainer to have salary sacrifice, because everybody benefits except the Treasury.

If employers are already contributing at the minimum and they cannot cut back, the likelihood is that as the cost of employment rises—because of the costs of pension provision—they will either reduce wage rises or cut employment levels. This is not some theoretical assumption, because all employers have to provide these pensions. The Government see this as impacting only high earners. As the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Londesborough, have already described, this is simply not so. It will hurt ordinary workers, especially middle earners. Reducing take-home pay and pensions will either reduce current pay, or deferred pay, or both.

I have a number of practical questions for the Minister. What happens if someone changes jobs during the year? How will the new employer know how much of the £2,000 contribution limit has been used up so far? Who is responsible for compliance, and for reporting to HMRC? Employers may need to update their pension scheme rules, member booklets, calculators, website information, staff portals, and so on. What is the Government’s estimate of the cost to business of all that? What is the estimate of the cost to employers which need to renegotiate their employment contracts for staff who agreed to a pay cut to accommodate a salary sacrifice that no longer applies? Who will cover the costs of all the increased queries that are bound to arise, including the cost of system and software updates, and member comms? How many employers will decide to abandon salary sacrifice altogether, and do the Government’s estimates of cost savings factor in the reduction in growth, and the reduction in future pensions, to offset the expected savings?

In conclusion, I hope that the Government will think again. There is plenty of time. What do the Government want from our pensions system? Do we want private pensions to improve? Do we want pension assets to support growth? If so, we need to encourage more pension contributions and incentivise holding and investing more for longer. That will not be achieved by increasing taxation on pensions or raising employer pension provision costs. These are important issues to assess in relation to the £80 billion-plus cost of tax and national insurance reliefs. They should be the subject of a holistic review in the round, rather than continuous, ongoing salami-slicing, tax by tax. This leaves workers and pensions potentially worse off and will potentially worsen the growth and living standards of the future.