National Insurance Contributions (Employer Pensions Contributions) Bill

Lord de Clifford Excerpts

Thursday 5th March 2026 Lords Chamber

[Lord Ashcombe (Con)]

My Lords, this is a very large group with a number of issues to address. First, I support my noble friends Lady Neville-Rolfe and Lord Altrincham in Amendment 1 in this group. I remind the House that the Department for Work and Pensions has acknowledged that, as of 2025, around 14.6 million working-age people are undersaving for retirement. Many of these individuals will be basic rate taxpayers, though certainly not all, and some will not have access to salary sacrifice arrangements. This amendment would ensure that only higher taxpayers are affected by the proposed £2,000 cap on salary sacrifice schemes. As a result, no basic rate taxpayer would be drawn into what might only be described as a new trap.

In Committee, the noble Lord stated more than once that 74% of employees who pay only the basic rate of tax—currently applicable up to £50,270—and who benefit from a salary sacrifice scheme would be unaffected by the £2,000 limit before the national insurance becomes payable. However, this necessarily means that 26% would be affected, and no figure has been provided for how many people that represents. Percentages alone can be extremely misleading without the underlying numbers. Therefore, I would be grateful if the minister could inform the House how many employees fall within that 26%, so that we may properly understand the scale of those who stand to be impacted.

This brings me directly to Amendment 7, in asking the Government what the definition of a high earner is. The answer given in Committee was totally noncommittal. May I therefore ask the Minister, as my noble friend Lady Neville-Rolfe has, to be transparent and provide a clear number? Is the threshold £30,000, £50,000, or is it some other number? I do not think this is too much to ask.

As for Amendment 5 in the name of my noble friend Lord Leigh of Hurley and others, there are already many students—including my sons—caught by the student loans repayment scheme. To fleece this cohort of individuals even harder seems extraordinary if salary sacrifice payments are considered as part of their income. They will never have a sufficient pension and, no doubt, some future Government will have to pick up the pieces.

Next, I would like to address the size of the cap, which currently would be £2,000. As I have mentioned, the proposed limitation is simply too low. Moreover, it fails to take account of those employees who may, on occasion, receive an unexpected windfall which they wish to contribute to their pension through a salary sacrifice arrangement. Amendment 12 from the noble Baroness, Lady Kramer, provides for a £5,000 cap, which would give employees the opportunity not only to save more towards their retirement but also to avoid a substantial national insurance liability on such a windfall. Provided inflation remains under control, this is a far more realistic and workable figure. While I would prefer the figure to be £10,000, as in amendments in the name of the noble Baroness, Lady Altmann, I fear that that is a step too far.

The amendments in the name of the noble Lord, Lord de Clifford, and those in the names of my noble friends Lady Neville-Rolfe and Lord Altrincham both address another issue: the quiet but persistent impact of fiscal drag. This is one of the most insidious ways in which Governments raise revenue without taking any overt action. With such a modest cap set out in the Bill, it risks being rapidly eroded by inflation, placing an unnecessary burden on basic rate taxpayers—precisely the group for whom pension saving is the most vital to support. I very much support those amendments.

Finally, Amendments 16 and 27 concern the SME and charity sectors. Last week in Committee, I mentioned many recent legislative changes that these entities have had to face, including the cost of energy, which now appears to be heading even further in the wrong direction. Between Committee stage and now, this has become very personal, as one of my children working in the retail industry was made redundant yesterday due to all these excessive costs. This Bill has not yet hit. I truly wonder if the company will survive. The Bill is, surely, another nail in the coffin for many more employees and, I suspect, a number of companies and charities themselves. They simply do not have the wherewithal to weather these storms, yet this Government insist on piling on ever more expenses, not only through greater national insurance payments but substantial additional associated administration costs. They will need to hire external resources to handle this difficult and pernicious legislation. It will not surprise noble Lords to know that I very much support these amendments.

[Lord de Clifford (CB)]

My Lords, I speak today in support of all the amendments in this group, particularly Amendments 12 and 26 in the name of the noble Baroness, Lady Kramer, and other Peers, and my own Amendments 14 and 27. I would have added my name to the noble Baroness’s amendments, but sadly I was a bit slow, and her popularity beat me. I remind the House of my registered interests as an owner of an SME and an employer.

Both these sets of amendments seek to increase the limit in separate ways. As I have spoken about at both stages of the Bill, the proposal mainly impacts middle-income earners. If the Government were to accept the amendment of the noble Baroness, Lady Kramer, this would allow all basic rate taxpaying workers making regular contributions to salary sacrifice not to have to pay NIC on their contributions. Also, it would encourage and give flexibility for workers on different salaries to increase their pension contributions above the 5% of auto-enrolment without being penalised and having to pay NIC on these increased contributions. Auto-enrolment is such an easy way for employees to raise their pension contributions and show flexibility.

I have seen in my own business that employees on a range of salaries from £30,000 to £50,000 per annum do increase and decrease their pension contributions depending on their current situation. This could be, for example, before starting a family or when they have a salary increase, small bonuses are paid, or they are moving closer to retirement. Accepting this limit will encourage people to save for their long-term retirement and give them flexibility in their contributions.

I have resubmitted my amendment as a suggestion and a compromise between the Government’s limit of £2,000 and the proposed new limit of the noble Baroness, Lady Kramer, of £5,000. My amendment seeks to increase the limit to £5,213.15 as it stands and is linked to the upper threshold of national insurance, at 5% of that amount.

I asked the Minister in Committee if there was any basis to the £2,000 limit other than the researchers’ suggestion to employers in the research commissioned by HM Revenue & Customs on attitudes to salary sacrifice, released in January 2024. Having reviewed the research, it appears that £2,000 is an arbitrary figure, if in some way linked to the median salary. The researchers contacted only 51 employers, of whom only 41 offered salary sacrifice. I believe that the total number of employers who offer salary sacrifice is around 290,000. Surely, only 51 employers is not a significant sample on which to base such an important change to the tax and pension systems.

--- Later in debate ---

[Lord Livermore (Lab)]

That was not a commitment I gave. What I said in Committee, and say again today, is this is not the right Bill to change the student loan repayment system. We will, however, look at ways to make the system we inherited from the previous Government fairer. That remains the position.

I turn, finally, to Amendments 12, 13, 14, 15, 26, 27, and 28, tabled by the noble Baronesses, Lady Neville-Rolfe, Lady Altmann, and Lady Kramer, and the noble Lords, Lord Altrincham, Lord Londesborough and Lord de Clifford. These amendments seek to increase the value of the cap or to uprate the cap by the percentage change in the consumer prices index or retail prices index. The purpose of the Bill is to cap an unchecked relief which predominantly benefits higher and additional rate taxpayers while protecting ordinary workers using salary sacrifice to make pension contributions. All employees using salary sacrifice will still benefit from national insurance contributions relief on £2,000 of contributions made via salary sacrifice. For a basic rate taxpayer, this is an additional £160 of relief relative to employees who do not use salary sacrifice.

The Government will keep the level of the cap under review, but we do not agree with the approach set out in these amendments, which seeks to uprate the cap in line with inflation. Automatic indexation of the cap would introduce a mechanism inconsistent with the treatment of other major pension tax reliefs, which are not routinely indexed. The Government’s view remains that the future level of the cap in the next decade and beyond is for Budgets in those decades. In light of the positions I have set out, I hope noble Lords may feel able not to press their amendments.

[Lord de Clifford (CB)]

Before the Minister sits down, my amendment would link the limit not to inflation but to the national insurance threshold. Therefore, if the Government wish to hold that threshold to raise more funds, they can. I just wanted to make that clear to your Lordships.

[Lord Livermore (Lab)]

I am grateful to the noble Lord. I think the position remains the same, though.