Salary sacrifice’s impact on pensions of the plans for salary sacrifice are outlined by the IFS. This is what the IFS does really well as it focusses on the logical behaviour of large and small employers in using this tax perk for savvy pension payers – and workplace pensions get paid by bosses.
What interests me most is that the public is by and large pro the abolition of salary sacrifice for all but the first £2,000 contributed. He kicks in at 33 minutes and here he picks up on the huge differences between those who don’t benefit from salary sacrifice (broadly the poorly paid, those working for SMEs and those who are self-employed) and those who might broadly called the high earners working for big employers. The majority of the benefit is earned by the employer. In short this is not a fair tax-perk and it does not seem fair to Treasury Executives.
If there is such a thing as a good tax increase , Andy Harrop of Public First says that salary sacrifice is it. This is the first and only time I’ve heard this said and it will not be popular in the pension community who are impacted in a number of ways.
- Personally; most people in financial services use salary sacrifice to make pension contributions
- Business wise; most people in financial services have some skin in the game of increasing pension funds and the IFS makes it clear that contributions will go down.
- Political; this is clearly a tax on the rich redistributing tax payments from rich to poor by a Labour Government.
You can read the excellent slides that are produced by the IFS here.
Stay around for the question session at the end of the you tube. Alice Jefferies of the CBI argues very well for the large employer and their highly paid employees but we know the arguments for maintaining salary sacrifice and I will not dwell on them.
