National Insurance Contributions (Employer Pensions Contributions) Bill

Charlie Maynard Excerpts

Committee of the whole House
Wednesday 21st January 2026 Commons Chamber

[The Second Deputy Chairman]

I call the Liberal Democrat spokesperson.

[Charlie Maynard (Witney) (LD)]

My chief concern with this Bill is that, like a lot of the measures that the Chancellor announced in the Budget, it looks like it may be a route to some medium-term increased tax revenues, but it gives no thought to longer-term consequences. That will help the Chancellor meet her fiscal rules, but I say “may” because the Bill does not kick in this year, next year, the year after or the year after that; rather conveniently, it will kick in during the election year of 2029-30. That is pretty useful if you are fighting an election and want to meet your fiscal rules, but it is not very useful if you are trying to be fiscally prudent, so that leads to some scepticism about what is actually going on here.

Given the pressures on the state pension and the social care system, it seems extremely counterproductive to reduce the incentives for those who can afford to save more towards their retirement. Let us look at the impact that small businesses have warned about. Pensions UK and the Federation of Small Businesses have jointly expressed their concern that these changes will increase costs for businesses that rely on salary sacrifice to support staff retention and reward. They state:

“Higher National Insurance costs and operational disruption would make it harder to offer competitive benefits, invest in growth, or plan effectively.”

We need to remember the wider context that small businesses are operating in. Even before this Bill, they were battling the sharply rising costs of everything from rents to energy bills, supplies, business rates, the costs of Brexit and so on, and they also have to adjust to the changes in their NICs bills that the Chancellor announced a year ago. One can imagine how that must feel for small business owners—the additional burden heaped on them feels unsustainable.

This Bill is a double whammy on last year’s national insurance hikes—the NICs burden went up last year due to the rate increase, and now this measure is raising their NICs bills for a second time. I would be interested to hear from the Minister what assessment the Government have made of the impact of these changes on businesses, and on small businesses in particular. That is why the Liberal Democrats have tabled amendments requiring the Government to publish full assessments of the impact of the Bill on the recruitment and retention and the tax liabilities of businesses.

Let us now consider the potential damage that this choice will do further down the road by disincentivising saving. Earlier this year, research by Scottish Widows found that 39% of people in the UK are not on track for a minimum lifestyle in retirement, which is a 4% increase since 2023. Research showed that people were actually saving more towards their pension in the last year, but projected retirement income was still failing to keep pace, given the rising cost of living.

[Chris Vince]

The shadow Minister, the hon. Member for Wyre Forest (Mark Garnier), challenged Labour MPs to champion their constituencies. One of the biggest concerns I have about pensions in my constituency of Harlow is the number of people who are not paying into any pension at all, particularly those who are self-employed or lower earners. Does the Liberal Democrat spokesperson agree that the real conversation that we in this place need to be having about pensions is how we encourage people in my constituency and beyond to save for their futures, which I think is what he is suggesting?

[Charlie Maynard]

I absolutely agree—well said.

The Government may well say that the Bill will not affect low earners, who are likely not to be saving £2,000 in a given year, as the hon. Member for Harlow (Chris Vince) has just said. However, that is too simplistic a way to look at this issue. The impact assessment by His Majesty’s Revenue and Customs found that an estimated 7.7 million employees currently use salary sacrifice to make pension contributions—that is around 25% of all employees. Of these, 3.3 million sacrifice more than £2,000 of salary or bonuses. That leaves millions of middle earners who are already feeling a significant squeeze as a result of myriad other cost of living pressures, who have had their taxes raised by the previous Conservative Government, and who are now facing an even greater hit due to this Government’s jobs tax and the extension of frozen income tax thresholds. If this Bill discourages those people from putting money away for their safety net in later life, the Treasury will pay the price in the long run.

Before the Budget, the Association of British Insurers warned that two in five Brits will save less in their pension if a cap on salary sacrifice schemes is introduced. With social care budgets also stretched to breaking point, we should be doing everything we can to incentivise people who are able to put money aside for a comfortable and supported retirement to do so. As the Institute of Chartered Accountants in England and Wales pointed out in its response:

“At a time when there is a pensions commission considering the adequacy of pension saving, this demonstrates a lack of joined-up thinking from the government.”

--- Later in debate ---

[Madam Deputy Speaker]

I call the Liberal Democrat spokesperson.

[Charlie Maynard]

I will let it pass from here.

Question put, That the Bill be now read the Third time.

National Insurance Contributions (Employer Pensions Contributions) Bill

Charlie Maynard Excerpts

Consideration of Lords amendments
Monday 23rd March 2026 Commons Chamber

[Madam Deputy Speaker (Judith Cummins)]

I call the Liberal Democrat spokesperson.

[Charlie Maynard (Witney) (LD)]

The Liberal Democrats have been clear throughout the Bill’s stages that we think the Government would be misguided to make this change. While it may raise some tax revenue in the medium term, in the longer term it discourages pension saving. It also puts an extra cost and admin burden on small businesses at the worst possible time. For that reason, we support Lords amendments 6 and 12, which would exempt small and medium-sized businesses and charities.

I would like to note again, as I did on Second Reading, that I am sceptical of the timing of this change. It will, very conveniently for the Government, only kick in during the likely election year of 2029-30, and not in 2026-27 or 2027-28. It seems as if the Government are motivated more by a wish to fix their numbers nominally to meet their fiscal rules than by a genuine belief that this change is the right thing to do. [Interruption.] I am asking the Minister to give us a reason why it is deferred and to explain that logic.

Lords amendment 5, tabled by my colleague Baroness Kramer, would raise the proposed threshold from £2,000 to £5,000 on NICs-exempt savings. That would at least mitigate the impact on many lower and middle earners. This would be a sensible way to ensure that it is genuinely those who can afford to pay more who are impacted by this change. The proposed threshold of £2,000 will undoubtedly hit people on relatively modest incomes who are simply trying to do the right and sensible thing and plan for their future. The CBI has also expressed its strong support for a threshold at £5,000.

[Mr Joshua Reynolds (Maidenhead) (LD)]

Does my hon. Friend agree that at times like these, we want the Government to be encouraging those on low and medium incomes to invest in their pensions and their futures—and increasing the threshold would help people to do that—rather than disincentivising people from doing so, as they seem to be doing at the moment?

[Charlie Maynard]

I completely agree. It sends the wrong message and puts in place the wrong incentives, and that is a real problem.

Ministers will have seen the analysis produced by the Office for Budget Responsibility in response to the former Lib Dem Pensions Minister, Steve Webb, highlighting the flaws in the Government’s claim that these changes will not impact most lower and middle earners—that is, those not saving more than the £2,000 threshold in any case. The OBR’s new analysis highlights three main ways that the Bill could affect the wider workforce. First, employers may move away from salary sacrifice altogether by increasing ordinary employer pension contributions in place of wage growth, all by reducing contractual pay in exchange for higher contributions. The OBR’s analysis makes it clear that any change of this kind would necessarily have to be applied across all of the workforce and could not be limited to higher earners, so the impact of these changes could indeed see lower pay rises or reduce base pay for employees who contribute less than £2,000.

Secondly, the new analysis spells out that some employees may move to make standard pension contributions, including through relief at source schemes, thereby losing the NICs advantages of salary sacrifice and increasing their NICs bill, even if they contribute small amounts. Thirdly, OBR modelling shows that employers would pass down around three quarters of the additional NICs cost to employees, mainly through lower wages, which again would likely hit all workers regardless of the amount they save through salary sacrifice.

Not only does this OBR analysis indicate that the Government have been wrong to frame these changes as something that will impact only those with broader shoulders, but, crucially, when the OBR assumed a significant behavioural response from employers and employees, the estimated amount this policy will raise fell by almost half, from £4.7 billion in 2029-30 to £2.6 billion in 2030-31, as these impacts feed through. I am interested to understand whether or not the Minister agrees with that point. Raising the threshold from £2,000 to £5,000 will not solve these issues entirely, but it would mitigate them by exempting a larger number of people on lower and middle incomes from the key change in the Bill. That would, in turn, reduce the number of employees impacted.

Lords amendment 2 relates to the repayment of student loans. This issue was also explored in the Lords, but I think it should be reiterated here, because although it is probably an inadvertent effect, it is none the less a significant issue. I appreciate the Minister’s words, but the fact remains that for any graduate who saves above the threshold, not only will their NICs payments go up, but so will their student loan repayments. This Bill is a double whammy on a group who are already struggling with high interest payments, escalating debt and a very challenging jobs market.

To conclude, with four in 10 people in the country, whether in my Witney constituency or any other Member’s, already not saving enough for retirement, and with the pressures on the state pension and social care system well known, it is counterproductive to reduce the incentives for those who can afford to do so to save towards their retirement. Once again, the measures in the Bill are short-sighted, and the Government’s justifications for them do not add up. I support the Lords amendments, which seek to iron out problems and mitigate the negative impacts. Overall, my party and I cannot support the Bill.