National Insurance Contributions (Employer Pensions Contributions) Bill

Lord Freyberg Excerpts

Thursday 5th March 2026 Lords Chamber

This incessant tinkering undermines confidence in the pension system itself. Long-term plans cannot be made when the goalposts keep moving. People just conclude, “Saving for a pension just isn’t for me”. The consequence of this lack of trust, which this Government are driving, is that you end up with people investing in Lego sets, Star Wars characters, silver slivers and bitcoin. Try spending those at Tesco. It is bad for everybody, but especially the youngsters starting out. The Government are not on the side of these people. They are the ones who are driving intergenerational unfairness. All students and graduates want is for the Government to give them a break—but instead they are being broken and this Bill is the final straw.

[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.

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[Lord Ashcombe (Con)]

My Lords, very briefly, I support Amendments 6 and 22 from my noble friends Lord Mackinlay and Lord Fuller. As we have heard, the practical application of the £2,000 cap per person must be clearly defined in primary legislation. Leaving such a significant distinction—whether the cap applies to an individual or to each job they may hold—to secondary legislation would create profound uncertainty.

The administration of salary sacrifice schemes is already complex. It is unreasonable to expect each employer to know whether their part-time employees have additional jobs elsewhere, let alone what they earn in those roles. Many of these additional jobs may be sporadic or seasonal, with even the employee unsure of when work will arise or what their pay will be, particularly if it is commission based. It is difficult to believe that the Government intend individuals with multiple jobs to track their own cumulative salary sacrifice across different employments; nor, I suggest, is it remotely feasible for HMRC to monitor such arrangements effectively. From a practical standpoint, this amendment is simply common sense.

I turn quickly to those amendments that address the affirmative procedure. As I mentioned earlier, it is widely recognised that pension legislation is, at best, complicated, and particularly important to individuals when they retire. It is only right that changes in legislation that concern so many people and so much capital should be subject to proper parliamentary scrutiny. This is not a political issue but one of immense importance; it should therefore be subject to affirmative procedure.

[Lord Freyberg (CB)]

My Lords, as mentioned in the previous group, the creative industries are defined by workers holding multiple short-term contracts with different employers across a single year. The central question that this group addresses, and which has been repeated several times today, is one that was put to the Minister in Committee and remains unanswered: is the £2,000 contributions limit £2,000 per person across all employments, or £2,000 per employment? The Minister was asked precisely this question in Committee by the noble Lord, Lord Mackinlay of Richborough, who has repeated it today. The Minister’s answer was:

“That intention will be set out in the regulations once we have fully consulted relevant employers”.—[Official Report, 24/2/26; col. GC 365.]


I have no doubt that that consultation will be thorough, but for workers planning their finances now, and employers designing payroll systems well before 2029, that leaves a gap that the Bill itself should fill. Amendments 6 and 22 would fill it: the limit would apply in relation to each employment.

Even with that resolved, a second problem remains. As we have heard from the noble Lords, Lord Fuller and Lord Ashcombe, when a worker moves between employers mid-year, no mechanism exists for tracking what has already been sacrificed or reporting it to the next employer. Amendments 36 and 39 would address this by making commencement conditional on the Government first publishing guidance that answers both those questions.

There is a further complication that has not been addressed by debates in either House. Many creative workers are engaged by the BBC under schedule D terms as self-employed contractors with no access to salary sacrifice. However, under the off-payroll rules that have applied to public sector bodies since 2017, the BBC must assess whether each such engagement is “employment in substance”. Where the BBC concludes that an engagement is employment in substance, the worker is deemed an employee for NIC purposes, yet they have no actual contract to vary. Salary sacrifice requires a varying employment contract; deemed employment, created by statute, is not a contract. The worker acquires the NIC liability of employment without access to its benefits. That same worker may also be genuinely self-employed with one employer and employed in an ordinary sense with another all in the same year, with no framework in the Bill to accommodate any of it.

These amendments would not change the policy or the 2029 commencement date. They would ensure that, when the Act comes into force, the people it affects know how much it applies to them. I will therefore be supporting all four amendments.

[Baroness Kramer (LD)]

My Lords, I will slightly anticipate the noble Baroness, Lady Rolfe, moving Amendments 9, 10, 24 and 25, which would require affirmative resolution for key elements of the Bill. Frankly, I do not think I have ever seen a Bill for which affirmative action was more required. In the other amendments, which have been brought forward so eloquently from across this House, we have some flavour of the extraordinary complexity.

I suspect that decision-makers at the top of the Government thought that this was something really simple, and that they were just going to put a cap on, with the rest being relatively easy to manage. However, the actual management of this is a complete nightmare. I cannot believe that a Bill that has been through the House of Commons already is on Report in the House of Lords, and yet we still do not know if the cap is going to apply to each employee or to each employment—which, to my mind, is two different Bills.

I completely agree with the noble Lord, Lord Leigh. I can see the nightmare of people wondering, “If I say this sentence, will I be caught by operational remuneration? Do I have to pretend, wink, or make sure I do not put anything down in an email?” We should not be putting people into situations where they have to try to work out how they handle this whole range of arrangements. The noble Lord, Lord Freyberg, knowing the creative industry so well, has thrown further complication into this. I very much suspect that the Government had absolutely no idea of the mare’s nest they were getting themselves involved with. I wish these issues had been teased out before this point.

The response brought forward by the noble Baroness, Lady Neville-Rolfe, of at least having affirmative resolution gives us some possibility of trying to scrutinise what has happened. This is an extraordinary situation. We do not know the core character of this Bill, so we will be dependent on those working through the affirmative resolutions to decide how on earth they will deal with what will turn out to be the form that eventually comes before us.

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[Baroness Altmann (Non-Afl)]

My Lords, I have added my name to Amendment 31, and I support Amendments 32 and 33. All these amendments seek to help the Government to recognise that there is a serious impact if this Bill goes through as currently proposed, particularly on employers in smaller and medium-sized companies. I believe that the Minister confirmed that some 99% of employers in auto-enrolment are SMEs. The costs of complying with pension auto-enrolment have already been significant. Some of those employers have been advised that it is a “no-brainer” for them to use salary sacrifice as a way of mitigating some of the extra costs involved in having to provide pensions for their staff who want to stay in them.

We have imposed these extra costs on employers already; some employers have been good enough to put in more than the auto-enrolment minimum. What this Bill would do is to pile extra costs on to them, because if they are using salary sacrifice, they will have to renegotiate employment contracts, change payroll software systems, change the information that they give to their workforce about their pension arrangements and answer lots of questions that are bound to arise as a result of any of the changes that are proposed.

It should therefore be incumbent on the Government—indeed, it is quite astonishing that this was not already done before we got the legislation—that there is a proper, independent review of the costs imposed on smaller and medium-sized employers as a direct result of this legislation. That should inform the way in which the legislation is implemented, so that we try to do whatever we can to avoid the kind of problems that we have seen, where there are implications for employment levels, salary levels and indeed for pension investment and provision as an unintended consequence of perhaps well-meaning legislation, or legislation designed to hit an entirely different target, that is potentially going to fall on both employers and their workforces. We have seen that the extra national insurance costs have had an impact on employment levels already. I ask the Minister again: what is the rush in getting this legislation on to the statute books before we know its implications and what it will mean in practice for the corporate sector? First, can the noble Lord explain the rush and, secondly, consider putting this on hold until the full implications are better understood?

[Lord Freyberg (CB)]

My Lords, I rise to support Amendment 31. It is of particular relevance to the creative industries and would require an independent review of the Act’s impact on small and medium-sized enterprises within 12 months of its passing. It would specifically require that review to examine the impact on those with “irregular remuneration”, “seasonal working patterns”, or “multiple employments”.

That language almost exactly describes the working pattern of a freelance editor, a set designer or an editor moving between short-term contracts across a year. Many of the production companies, commercial houses and independent studios that engage those workers are themselves SMEs. Amendment 31 would ensure that Parliament receives evidence of how the Act operates in practice for both the workers and the businesses that depend on them. I therefore urge the House to support it.

[Lord Leigh of Hurley (Con)]

My Lords, I support these amendments. I declare an interest in that I am involved with a number of small and medium-sized enterprises. These amendments mirror amendments that we tabled to the then Employment Rights Bill, because we thought that the Government wanted to help and protect small and medium-sized businesses. That turned out not to be the case, which was very disappointing. Representations were made, and have been made in this instance, by the bodies that represent such small businesses that they do not welcome this.

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[Baroness Altmann (Non-Afl)]

My Lords, I rise briefly to speak to my Amendments 35 and 40 in this group, which seek to do similar things in different ways from the other amendments in this group, all of which I support. I certainly think that the suggestion from the noble Lord, Lord Ashcombe, on the publication of relevant documents and reports makes significant sense, and having a repository of information would certainly be helpful.

This group of amendments is yet again trying to help the Government see that they are premature in laying the legislation and there is not enough understanding of what the impacts in practice will be for employers and workers. In Amendment 35, each area on which I ask for an independent report to be produced is itself a complex area of pensions administration that needs to be understood before we make the kind of change that sounds simple but in practice will be anything but.

It sounds as if it will not make much difference, but in practice, it could cost significant sums to employers, as well as having this significant potential impact on making pension provision worse across the country. At the very time when we are talking about perhaps making state pensions a bit less generous or delaying the age at which they will start, it makes private pensions even more important for anyone in poor health who cannot wait until the ever-rising state pension age. The idea is for them to have something to fall back on to bridge the gap, at least.

I hope the Minister, for whom I have enormous respect and who I know is very well intentioned and understands these issues, will take back to his department the deep unease across this House at the lack of preparedness and information that we have been given. Once again, could he help explain—and if not today, perhaps he will write to me—the seemingly inordinate rush, within just a few weeks, to bring in this legislation, which is not due to start until 2029, so that we have a better understanding of what the Bill’s impacts would be?

[Lord Freyberg (CB)]

My Lords, I support Amendment 35 in the name of the noble Baroness, Lady Altmann, which would require the Government to commission an independent review within 12 months of passing the Act, covering a comprehensive range of impacts. Among the items it would have to consider are, explicitly, “workers with multiple jobs”, and

“workers who change jobs during any tax year and have made pension salary sacrificed contributions”.

Those two categories define the working life of a freelance creative. The Government’s answer throughout the Bill has been that these questions will be resolved in regulations. Amendment 35 would at a minimum ensure that Parliament sees independent evidence of whether that resolution has worked in practice.

Amendment 40, also in the name of the noble Baroness, Lady Altmann, would go further and make commencement conditional on a review of the Act’s practical feasibility. Given the complexity we have heard about and that I have described for workers with mixed employment statuses, including those engaged by the BBC under off-payroll rules while simultaneously working for other employers, that is not an excessive precaution. Therefore, I support both these amendments.

[Baroness Kramer (LD)]

My Lords, I shall be exceedingly brief. The amendment proposed by the noble Lord, Lord Ashcombe, is, quite frankly, genius. We have all had a struggle trying to get our hands on information that is scattered in so many different places, and I am fairly sure that if this was put with a secret ballot to civil servants they would all sign up because they struggle as well. It makes it very difficult when new policy comes through to try to work out what on earth the consequentials are, what numbers to look at, how to weigh these issues and how to understand distribution of impact, so I support his amendment.

This is such a complex Bill. When the instructions went down to put the Bill in place, I am sure there was absolutely no sense of the complexity that was going to be entangled in it. Amendment 38 in my name was triggered particularly by the OBR publication, again in response to an FoI, Costing of charging NICs on salary-sacrificed pension contributions, which was a supplemental analysis. The word “uncertainty” appeared in so many parts of it that we began to have a sense that no one could have huge confidence in the final numbers that were appearing, and it was very honest of the OBR to make it clear that there were vast uncertainties underpinning large parts of this work.



Very much like the noble Lord, Lord Leigh, I still do not think that we have bottomed out the problem with optional remuneration arrangements. It is easy to assume that we can distinguish between a negotiation where we are choosing between cash and a pension and having a negotiation that involves cash and a pension. But can we claim that the two are not related to each other, so that we do not get trapped by OpRa? There is a lot in here, and a review is the least we should do to make sure that we have a grip on these things and that Parliament gets to see it when it is still in a position to make some decisions.