Salary sacrifice cap ‘is short-sighted tax grab undermining retirement security’

Workers and employers will feel the “pain” from a £2,000 salary sacrifice cap on pensions announced in the Budget, finance experts have said.

Fears were raised that employers would make workplace schemes less generous and that people’s long-term financial security would be eroded.

The change means that salary-sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from national insurance from April 2029.

Contributions above £2,000 will be treated as ordinary employee pension contributions in the tax system and subject to national insurance contributions.

A document, released by the Office for Budget Responsibility in error ahead of Chancellor Rachel Reeves’s Budget speech, said: “The policy results in an increase in NICs (national insurance contributi