The House of Commons has removed amendments to the National Insurance Contributions (Employer Pensions Contributions) Bill that would have raised the proposed National Insurance (NI) relief cap on salary sacrifice for pension contributions and excluded basic rate taxpayers from the measure.

In the 2025 Autumn Budget, the government announced plans to charge NI on salary sacrifice pension contributions above £2,000 from April 2029.

As the bill made its way through the House of Lords, amendments were added that would have increased the salary sacrifice NI cap for pension contributions from £2,000 to £5,000, and excluded basic rate taxpayers from the measure.

In the Commons, these amendments were overturned, with the reasoning for both being: “Because the Lords amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further reason, trusting that this reason may be deemed sufficient.”

The bill will return to the House of Lords for further consideration, leading to a potential back and forth between the houses.

“Our analysis shows the proposed £2,000 cap on NI relief for pension contributions will have a disproportionate impact on middle earners,” said LCP partner and pensions tax specialist, Alasdair Mayes.

“In these uncertain times it’s important that individuals save enough for their retirement and salary sacrifice has proved an effective incentive for them to do so.

“Whittling away at the tax incentives for pensions savings, whether through applying inheritance tax to pension savings or reducing tax relief risks creating another generation with insufficient savings. This will store up problems for future governments.

“The Office for Budget Responsibility has shown that nearly half of salary sacrifice is for bonuses rather than regular contributions from pay.

“This suggests that a higher cap such as £5,000 or exemption for basic rate taxpayers would be well targeted on protecting those who use salary sacrifice to reduce the cost of regular pension contributions but would still capture the government’s target of higher earners who receive significant annual bonuses.”

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