Autumn Budget 2024: Employer NIC hike branded a 'major setback' for efforts to tackle pension undersaving

Chancellor, Rachel Reeves, has announced plans to increase the rate of employer National Insurance contributions (NIC), in a move that industry experts have warned could represent a “major setback” to hopes of progress on Britain’s under-saving crisis.

During her Autumn Budget 2024, Reeves announced that the rate of employer National Insurance contributions has been increased from 13.8 per cent to 15 per cent from April.

In addition to this, the threshold at which it is paid has been cut from £9,100 per year to £5,000.

Whilst no specific changes to NIC on pension contributions, as previously suggested, industry experts have suggested that the broader NIC hike could still "scupper" progress made by auto-enrolment.

Hargreaves Lansdown head of retirement analysis, Helen Morrissey, said: “Raising employer National Insurance may not look like the type of change that will impact employees but over time it has the capacity to make a real dent in their financial resilience.

"Heaping extra costs on employers, alongside a planned uplift in the minimum wage will likely result in lower wage increases over the longer term.

"Longer term we need employers to boost their pension contributions beyond auto-enrolment minimums as the government attempts to boost auto-enrolment.

"However, given the extra demands placed on employers by increased NICs. the government could find it meets real resistance to further reform when we need a partnership approach.”

LCP partner, Steve Webb, also warned that the NIC hike on employers could be a "major setback" to hopes of progress on Britain’s under-saving crisis, warning that "pension improvements risk being stuck ‘in the slow lane’".

He stated: "The hike in employer pension contributions is terrible news for hopes of action to tackle Britain’s pension under-saving crisis.

"Even the government accepts that millions of people are not saving enough for a decent retirement, and there is no doubt that part of the answer is workers and their employers contributing more.

"But with employers already having to absorb a big increase in payroll costs, it seems highly unlikely that the government will try to ‘double dip’ and ask employers to pay more for pensions any time soon.

"Even the modest improvements to automatic enrolment for which legislation has already been passed are at risk of being stuck in the slow lane. This is a worrying day for anyone who cares about the adequacy of pension saving in the UK”.



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