The Budget details lurking in the small print

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “From April 2029, only the first £2,000 of employee pension contributions through salary sacrifice each year will be exempt from National Insurance.

“Employee contributions above this amount will be subject to employer and employee National Insurance.

“This comes after the government said the scheme was costing far more than was intended with the benefit being largely focused on higher earners.

“According to the government, 74 per cent of basic rate taxpayers will be unaffected by the change but it will affect those who wish to boost their contributions beyond auto-enrolment minimums and end up breaching the £2,000 limit. Higher earners will also be affected.

“It’s important to say that contributions will still be exempt from income tax, so it remains a really tax efficient way to save for retirement.

“It’s also worth saying that the change will not be made until 2029, so there is plenty of time to make the most of the system as it currently stands.

“If you have some spare cash and you contribute to a salary sacrifice arrangement it could make sense to boost your contributions and make the most of the income tax and National Insurance savings to boost your long-term resilience.

“From April 2027 pensions will be included as part of people’s estate for inheritance tax purposes. It’s a plan that could bring delay, cost and complexity to families at a difficult time.

“However, there seems to be some respite hidden in the documents saying that personal representatives will be able to direct pension scheme administrators to withhold 50 per cent of taxable benefits for up to 15 months and pay inheritance tax due in certain circumstances.

“Personal representatives will also be discharged from a liability for payment of Inheritance Tax on pensions discovered after they have received clearance from HMRC.

“Such changes could bring some much-needed flexibility and clarity to a difficult process.”