Rachel Reeves pension moves spark warning over retirement savings shortfall Warning over retirement savings shortfall: Britain’s finance minister Rachel Reeves said the government was taking “difficult but necessary decisions” after announcing pension tax changes in the November budget.
Reeves said the move would cap salary sacrifice pension contributions that avoid national insurance at £2,000 a year from 6 April 2029.
She said the changes were part of efforts to “balance support for retirement saving with fairness across the system”.
Salary sacrifice is where an employer agrees to reduce an employee pay and instead puts money into a pension or other benefit for them. At the moment workers do not pay income tax or national insurance on these pension contributions.
The move has been described as a hammer blow to private sector pensions and as a wake-up call for people thinking about later life planning.
Peter Shuttleworth, general manager at direct cremation provider Celebration of Life, said the change would mean people save less into pensions at a time when many are already not prepared for retirement.
“This change will mean people save less into their pensions at a time when many are already not prepared for retirement,” he said.
He added that restricting salary sacrifice is “a big change” and means people should take a hard look at long term plans, saying the government says it supports retirement planning “but is putting a tax penalty on people saving for retirement”.
Founded in two thousand and nineteen, Celebration of Life operates in the direct cremation sector, offering prepaid plans or services at the time of need.
