Overview
- Peers voted to raise the proposed £2,000 annual cap on tax-free pension salary sacrifice to £5,000, delivering one of five defeats for the government in the Lords.
- Amendments passed by peers also seek to exempt basic-rate taxpayers and to prevent contributions above the cap from counting as income for student loan repayments.
- The National Insurance Contributions (Employer Pensions Contributions) Bill cleared its third reading in the Lords and now enters parliamentary ping-pong, where ministers could try to strip out the changes.
- Ministers confirmed the cap would apply per employment rather than per person, allowing workers with multiple jobs to double or treble their allowance, a design pensions experts criticized as a loophole.
- Treasury ministers argue the reform is needed to contain salary-sacrifice costs projected to reach about £8 billion a year, with implementation scheduled for April 2029.