National Insurance Contributions (Employer Pensions Contributions) Bill

Mark Garnier Excerpts

Monday 23rd March 2026 Commons Chamber

[Madam Deputy Speaker (Judith Cummins)]

I call the shadow Minister.

[Mark Garnier (Wyre Forest) (Con)]

I would also like to start by thanking the Lords for their very hard work. I do not think the Government won a single vote during the Bill’s passage in the other place.

Over the past few months, we have seen how enthusiastic the Government are to raid savings. In particular, they are very keen to raid pension pots. Whether by taking powers to mandate private pension funds to invest in Government white elephants or through the Bill we are debating tonight, the Government have established beyond any doubt that they have no interest whatsoever in savers and strivers.

Pensions are important. They provide for security in retirement. The pact that has been established between the state and the pension saver, which goes back to the 1920s, is all about not just helping savers but taking the strain off the state: encourage saving now and there will not be a burden on the state of an impoverished pension in the future. Under the previous Government, we saw the roll-out of auto-enrolment, bringing 10 million people into the savings culture, and we introduced the triple lock to reverse the decline in the value of the state pension under the previous Labour Government.

Despite those positive steps, we recognise that people are still not saving enough for their retirement. As the Government’s own analysis shows, 50% of savers are projected to miss their retirement income targets set by the 2005 Pensions Commission, so we need to do better. I know there is cross-party consensus on that point, if nothing else, so let us be honest: the changes to salary sacrifice arrangements will do the complete opposite. As the Association of British Insurers and Pensions UK have outlined, we should be improving our current offering and providing new opportunities. Instead, the Government are making the situation worse in a desperate attempt to balance the Government’s books, conveniently in three years’ time. Frankly, it makes little sense and that is why we oppose this legislation.

The point of salary sacrifice arrangements is that they incentivise certain behaviours. That is why people are allowed to use these schemes to put money towards not just pensions but workplace nurseries, childcare vouchers and cycle-to-work schemes. Those are all good things. However, in this case the Government have singled out pensions and are attacking one of the most important things that people should be saving towards—their pensions. This is hard-earned taxpayers’ money that could be going towards a good thing. Instead, the Bill will remove an avenue that 7.7 million employees are currently using. The Bill will add even more cost to the 290,000 businesses and charities that use it. It will pile more cost on to students already saddled with student loans. It will harm pensions adequacy and force more people to rely on the state, pushing more costs on to the next generation. I am proud that my colleagues in the Lords, as well as Liberal Democrat and Cross-Bench peers, understand those concerns. The Opposition remain opposed to the Bill, but the amendments do go some way to address those issues and support the stated objectives of this policy, even though we disagree with the fundamental policy.

Lords amendments 1 and 7 would make basic rate taxpayers exempt from this policy. That would protect a group who typically under-save and allow them to continue to put savings into their pensions. The hon. Member for Harlow (Chris Vince) may be interested in listening to this, because he raised a very important point about lower rate taxpayers. The amendments are identical to the amendment we tabled in the Commons and that Labour MPs decided to vote down. As the Government’s own impact assessment clearly states, they are trying to target higher earners or those making larger contributions. While that might be the stated purpose and the political justification, in reality that is not the case for two reasons.

First, the cap will still affect 858,000 basic rate taxpayers, according to the Society of Pension Professionals. In fact, reporting from the Financial Times has highlighted how the Bill will disproportionately affect those people, compared to those on a higher rate of tax. Those on the basic rate of tax pay 8% national insurance contributions, while those on the higher rate of tax pay 2% NICs. That means that on national insurance contributions alone, lower earners are being hit four times as hard by this policy—four times. On Second Reading, I asked the Minister how that could be fair. He did not answer my question then, but I hope he will be able to answer it when he winds up. Maybe he can tell us how the policy is fair for those hard-working people, or whether they are just casualties of rushed policymaking.

Secondly, a behavioural outcome may be that employers will remove salary sacrifice as an option for all their employees. We already recognise that salary sacrifice is mutually beneficial for employees and employers. It is also more attractive to both sides, as it is simple to understand. By enforcing the cap, it will change not only the viability of salary sacrifice arrangements, but employers’ perception of them.This may result in many employers removing them as an option altogether, meaning that 4.4 million people who are supposedly protected may be affected. If this Government were really serious about their policy objective, they would exempt basic rate taxpayers altogether. These amendments give them the chance to do just that and to back hard-working people.