National Insurance Contributions (Employer Pensions Contributions) Bill

Joshua Reynolds Excerpts

Monday 23rd March 2026 Commons Chamber

[Charlie Maynard (Witney) (LD)]

The Liberal Democrats have been clear throughout the Bill’s stages that we think the Government would be misguided to make this change. While it may raise some tax revenue in the medium term, in the longer term it discourages pension saving. It also puts an extra cost and admin burden on small businesses at the worst possible time. For that reason, we support Lords amendments 6 and 12, which would exempt small and medium-sized businesses and charities.

I would like to note again, as I did on Second Reading, that I am sceptical of the timing of this change. It will, very conveniently for the Government, only kick in during the likely election year of 2029-30, and not in 2026-27 or 2027-28. It seems as if the Government are motivated more by a wish to fix their numbers nominally to meet their fiscal rules than by a genuine belief that this change is the right thing to do. [Interruption.] I am asking the Minister to give us a reason why it is deferred and to explain that logic.

Lords amendment 5, tabled by my colleague Baroness Kramer, would raise the proposed threshold from £2,000 to £5,000 on NICs-exempt savings. That would at least mitigate the impact on many lower and middle earners. This would be a sensible way to ensure that it is genuinely those who can afford to pay more who are impacted by this change. The proposed threshold of £2,000 will undoubtedly hit people on relatively modest incomes who are simply trying to do the right and sensible thing and plan for their future. The CBI has also expressed its strong support for a threshold at £5,000.

[Mr Joshua Reynolds (Maidenhead) (LD)]

Does my hon. Friend agree that at times like these, we want the Government to be encouraging those on low and medium incomes to invest in their pensions and their futures—and increasing the threshold would help people to do that—rather than disincentivising people from doing so, as they seem to be doing at the moment?

[Charlie Maynard]

I completely agree. It sends the wrong message and puts in place the wrong incentives, and that is a real problem.

Ministers will have seen the analysis produced by the Office for Budget Responsibility in response to the former Lib Dem Pensions Minister, Steve Webb, highlighting the flaws in the Government’s claim that these changes will not impact most lower and middle earners—that is, those not saving more than the £2,000 threshold in any case. The OBR’s new analysis highlights three main ways that the Bill could affect the wider workforce. First, employers may move away from salary sacrifice altogether by increasing ordinary employer pension contributions in place of wage growth, all by reducing contractual pay in exchange for higher contributions. The OBR’s analysis makes it clear that any change of this kind would necessarily have to be applied across all of the workforce and could not be limited to higher earners, so the impact of these changes could indeed see lower pay rises or reduce base pay for employees who contribute less than £2,000.

Secondly, the new analysis spells out that some employees may move to make standard pension contributions, including through relief at source schemes, thereby losing the NICs advantages of salary sacrifice and increasing their NICs bill, even if they contribute small amounts. Thirdly, OBR modelling shows that employers would pass down around three quarters of the additional NICs cost to employees, mainly through lower wages, which again would likely hit all workers regardless of the amount they save through salary sacrifice.

Not only does this OBR analysis indicate that the Government have been wrong to frame these changes as something that will impact only those with broader shoulders, but, crucially, when the OBR assumed a significant behavioural response from employers and employees, the estimated amount this policy will raise fell by almost half, from £4.7 billion in 2029-30 to £2.6 billion in 2030-31, as these impacts feed through. I am interested to understand whether or not the Minister agrees with that point. Raising the threshold from £2,000 to £5,000 will not solve these issues entirely, but it would mitigate them by exempting a larger number of people on lower and middle incomes from the key change in the Bill. That would, in turn, reduce the number of employees impacted.

Lords amendment 2 relates to the repayment of student loans. This issue was also explored in the Lords, but I think it should be reiterated here, because although it is probably an inadvertent effect, it is none the less a significant issue. I appreciate the Minister’s words, but the fact remains that for any graduate who saves above the threshold, not only will their NICs payments go up, but so will their student loan repayments. This Bill is a double whammy on a group who are already struggling with high interest payments, escalating debt and a very challenging jobs market.

To conclude, with four in 10 people in the country, whether in my Witney constituency or any other Member’s, already not saving enough for retirement, and with the pressures on the state pension and social care system well known, it is counterproductive to reduce the incentives for those who can afford to do so to save towards their retirement. Once again, the measures in the Bill are short-sighted, and the Government’s justifications for them do not add up. I support the Lords amendments, which seek to iron out problems and mitigate the negative impacts. Overall, my party and I cannot support the Bill.