In this week’s Enews, we look at the numbers behind the Budget changes to salary sacrifice pensions. There is also news on the government’s apprenticeship initiative and economic forecasts following the Budget to update you on.
Salary sacrifice changes will impact over three million employees
The removal of full tax-free salary sacrifice on pensions with a new £2,000 limit will hit over three million employees at 290,000 companies, according to government figures.
The change to pension salary sacrifice is due to come into effect from 6 April 2029 and will see a new £2,000 limit on the amount of contributions employees can make into a salary sacrifice scheme free of tax and national insurance contributions (NICs), hitting schemes run by UK employers.
Almost eight million employees currently use salary sacrifice to make pension contributions. Of these, over three million sacrifice more than £2,000 of salary or bonuses.
However, just over half of employees will fall below the threshold based on current HMRC estimates, meaning over four million pension savers will not be affected.
The government said:
‘The government supports and incentivises pension saving and has retained Income Tax and NICs reliefs on pensions contributions that are worth over £70 billion per year.
‘Most other salary sacrifice opportunities were closed in 2017. Salary sacrifice for pensions contributions remains, and its cost as a relief has increased markedly from £2.8 billion in forgone NICs in tax year 2016 to 2017, rising to £5.8 billion in tax year 2023 to 2024. Were no changes made, it is expected that this would nearly triple to £8 billion by tax year 2030 to 2031.’
Internet link: GOV.UK
£725 million UK apprenticeship overhaul targets youth unemployment
A £725 million package of skills reforms to the apprenticeship system with the aim of helping to tackle youth unemployment and drive economic growth, has been announced by the UK government.
The government says the reforms will create 50,000 additional apprenticeships and foundation apprenticeships over the next three years.
As part of the package, the government will also cover the full cost of apprenticeships for eligible young people under 25 at small and medium-sized businesses.
The announcement also emphasised that removing the 5% co-investment rate for SMEs means that the training costs for all eligible under 25 apprentices are fully funded, opening up thousands of opportunities for young people.
Lizzie Crowley, Skills Adviser for the Chartered Institute of Personnel and Development (CIPD), said:
‘Apprenticeship starts have been falling for years, limiting opportunities for young people and preventing organisations – especially smaller firms – from building the skills they need to boost performance.
‘Creating 50,000 apprenticeships and giving mayors a stronger role in connecting young people with employers is a positive step. And in a year of rising employment costs, fully funding apprenticeship starts for under-25s in smaller businesses will be welcome.
‘However, removing the 5% employer contribution alone won’t drive take-up. Cost is rarely the main barrier for smaller employers; the greater challenge is releasing staff for off-the-job training and having the management capacity to support apprentices effectively day to day. Without tackling those practical constraints, take-up is likely to remain limited.’
Internet link: GOV.UK CIPD website
Budget unlikely to be growth game changer
The Autumn Budget is unlikely to kickstart the UK economy with the nation’s growth outlook remaining subdued, according to research from the British Chambers of Commerce (BCC).
The UK economy is expected to grow by 1.4% in 2025, revised slightly up from the previous forecast of 1.3%, driven by strong public spending, according to the BCC.
However, GDP is expected to slow to 1.2% in 2026, before rising to 1.5% in 2027, because of productivity challenges and cautious fiscal tightening, the business group added.
The BCC says that business investment is forecast to suffer significantly next year – falling from expected growth of 3% in 2025, to just 0.9% in 2026. It is then expected to rise again to 1.5% in 2027.
The projected weak levels of business investment are due to ongoing cost pressures on firms and the lack of direct growth measures in the Budget.
David Bharier, Head of Research at the British Chambers of Commerce said:
‘Our forecast suggests the Autumn Budget is unlikely to be a growth game changer for the UK economy.
‘Taken together the forecast paints a picture of an economy remaining stuck in low gear. Businesses are showing remarkable resilience and innovation, but many are weighed down by political uncertainty and the cumulative cost pressures.
‘Delivery on growth is now key – the government has published industrial, trade, and infrastructure strategies, and these must translate into action.’
Internet link: BCC website
