National Insurance Contributions (Employer Pensions Contributions) Bill

Debate between Lord Freyberg and Lord Davies of Brixton

Report stage
Thursday 5th March 2026 Lords Chamber

[Lord Freyberg (CB)]

My Lords, I apologise for not speaking earlier in the Bill’s passage. I have only recently become aware of how its provisions bear on freelance workers in the creative industries, and I hope the House will permit me to raise those concerns across the relevant groups. I declare an interest: I have worked both as a freelance editor on short-term contracts and on payroll, and I understand from personal experience how differently this legislation lands, depending on which side of that line a worker falls.

I support the amendments in this group, in particular Amendments 1 and 17, which would exempt basic-rate taxpayers from the cap, and Amendments 14 and 27, which would index the limit to the national insurance upper earnings limit, rather than fixing it at a flat £2,000.

The creative industries are built on short contracts. A set designer or director of photography may work for three or four different employers in a single year, such as a commercial house, a broadcaster or an independent film company, each engagement lasting weeks rather than months. Many of those workers are basic-rate taxpayers. The Government have consistently justified the Bill as targeting higher earners, yet, as we have heard, these are precisely the workers it will catch. Amendments 1 and 17 would correct that directly.

Amendments 14 and 27 address a related problem. A creative worker with a good year followed by a lean year faces a rigid £2,000 cap that takes no account of natural variation in earnings. Indexing the limit to the upper earnings limit would at least ensure that it kept pace with the economy.

Amendments 12, 26 and 13 would raise the cap to £5,000—or £10,000, as we have heard—which would substantially reduce the problem for those with fluctuating incomes, and I support the principle behind them.

Finally, Amendments 4 and 20 would remove from the optional remuneration rules any pension contributions where no cash alternative was offered. For a freelancer on a standard short-term contract, where the pension arrangement is simply a term of engagement, not a personal tax planning choice, that is a straightforward matter of fairness. I urge the House to support these amendments.

[Lord Davies of Brixton (Lab)]

I want to contribute, by supporting the Government, a bit of sense to this debate. We have heard so much doom and gloom, but what is the reality? What impact are these measures going to have? I am sure my noble friend the Minister will be able to tell us.

The first point to understand is that salary sacrifice for pension contributions really makes no sense. It is a form of regulatory arbitrage. It has never made any sense and it is notable that previous Governments have taken away almost all forms of salary sacrifice on other in-work benefits, without forecasting the end of incentives for working. I have always been against it in principle—I would be happy to see it removed entirely, but possibly that might be politically suicidal—but a £2,000 limit seems an entirely reasonable approach to providing some fair incentive without the opportunity for, in truth, gross inequality. We are told that this measure hits the lower paid and not so much the higher paid, but of course the people who make most use of this are people with enormous bonuses. That is where the money is going and these measures will stop that.

Secondly, it is not an essential element in our current pension system. The key question that none of the previous speakers has addressed is: what is the right level of tax incentive for pension saving? That is a proper debate, and it cannot be answered by saying that more is always better. We have to draw up a fair judgment on where, and how far, tax incentives to encourage people to save for retirement should go. It is obvious that, if you reduce tax incentives, there will be an impact on people’s decisions. One impact that it might have is to encourage them to save more, because, if they have a target pension in mind, they will need to save more money than they did previously.

Thirdly, figures are quoted for the impact on individuals, particularly those under the higher-rate threshold. Well, I have a spreadsheet and I have calculated those figures, and, as I said at Second Reading and in Committee, the effect on basic-rate taxpayers on incomes around and above the median level is marginal. What sorts of figures do you think we are being told are going to have such a shattering effect on the pension system? For someone on median earnings, paying the median contribution rate, it is nothing. Maybe, if you earn a bit more towards the tax threshold, it will be something like £40 a year.

Now, nobody likes paying more tax. I could explain that the reason why there is this demand for more taxes is 14 years of mismanagement by the previous Government, but I will leave that to my noble friend. But it does annoy me that so much emphasis is placed on what is essentially a sideshow to the important questions of pension provision that we are going to have to address.