More than three million pension savers are set to lose £84 a year as a result of Rachel Reeves’s cap on salary sacrifice, official figures have shown. The measure, announced in the Budget, will restrict the amount workers can divert from their pre-tax salary into pension schemes.
According to the Government’s own impact assessment, around 7.7 million people currently use salary sacrifice arrangements. Under these schemes, employees do not pay income tax or national insurance on pension contributions, and employers also avoid paying national insurance on the sacrificed amount.
The change means that for savers above the cap, the tax advantage will be reduced, costing each affected individual an estimated £84 annually. The policy is designed to raise revenue for the Treasury, but has drawn criticism for hitting ordinary workers saving for retirement.
The figures emerged as part of the wider Budget package, which has faced scrutiny over its impact on working families. Officials argue the cap is necessary to ensure the relief is fair, but campaigners warn it could discourage pension saving at a time when many are struggling to build adequate retirement funds.
