National Insurance Contributions (Employer Pensions Contributions) Bill

Lord Londesborough Excerpts

Wednesday 4th February 2026 Lords Chamber

[Lord Londesborough (CB)]

My Lords, I accept that this Government, like their predecessor, have little room for manoeuvre if they are to keep within their fiscal rules at a time of sluggish growth, so I am not surprised to see them bearing down on the tax efficiencies of employer pension contributions, which the Treasury believes would generate almost £7.5 billion in tax revenue over the two financial years 2029-30 and 2030-31. Unlike with last year’s NICs Bill, with its growth-sapping and job-depressing £25-billion hike in employers’ NICs, I currently have no plans to table any amendments to this Bill—but I do have two questions for the Minister about Clause 1.

Before asking those questions, let me say that I am concerned that the Bill penalises the responsible working person who is doing the right thing, putting some money aside to fund their retirement and old age, as a pension funding crisis looms on the horizon. For greater insight into that, and the disturbing economics of our ageing society, perhaps I may recommend the latest report, Preparing for an Ageing Society, from the Economic Affairs Committee, on which I sit, as does the noble Lord, Lord Davies of Brixton. It is a sobering read because, quite simply, we are not prepared.

The first area I would like to probe concerns the forecasts for £40 million to £75 million annual losses in tax revenue in the next three years, before the Bill comes into force. I understand that those losses factor in the expected behavioural change that the noble Baroness, Lady Neville-Rolfe, correctly highlighted, but they strike me as undercooked based on what I am seeing and hearing at the coalface. I should declare that I am an adviser to, and invest in, a range of start-ups and scale-ups, a number of which, understandably, have drawn up plans for their staff to increase and front-load levels of salary sacrifice while the three-year window allows, so that both employer and employees reduce their exposure to NICs.

Of course, I accept that that is anecdotal evidence, but it strikes me that the behavioural change triggered by Clause 1 of the Bill may result in nine-figure annual reductions of tax revenues: that is, hundreds of millions, not tens of millions, as suggested by the very brief tax information and impact note. Could the Minister explain how these figures have been calculated? What are the assumptions? The Minister may be interested to hear the advice coming from a leading HR and tax consultant, whose advice to CFOs and CPOs reads as follows:

“There are still more than three years to take advantage of salary sacrifice available and, with another General Election due in 2029, the legislative landscape could change again”.


My second question concerns the rationale for setting the contributions limit at £2,000 per tax year, which, as we have just heard, will hit middle earners the hardest. As we have heard, due to the way that employee NICs work, the deductions will be 2% of the contribution over the cap for higher earners but up to 8% on the excess for people earning below £50,000. Why are we hitting this group, which includes nurses, therapists, teachers, data scientists, young professionals and entrepreneurs, so disproportionately hard? Could the Minister please explain? This has some echoes of last year, when the increases to employers’ NICs disproportionately penalised SMEs with more than three staff, employers in the lower-paid sectors and, especially, part-time workers in areas such as hospitality and retail—and look how that has worked out for job creation and employment prospects in those sectors since.

I finish with a more general point about our tax system. This Bill and last year’s Act highlight why we need to radically overhaul—that is, simplify—our horrendously complicated tax code, which is an accumulation of chopping and changing by Governments on both sides over the last 50 years or so. However, I acknowledge that that is a big subject for another day, and time is short.