National Insurance Contributions (Employer Pensions Contributions) Bill

The National Insurance Contributions (Employer Pensions Contributions) Bill is a government bill (bill 344 of the 2024–26 parliamentary session). The bill was introduced on 4 December 2025. The Commons will consider Lords amendments on 23 March 2026. 

Further details on the clauses are available in the bill’s explanatory notes.

Pension salary sacrifice

When an employee pays into their pension, both the employee and their employer pay National Insurance contributions (NICs) on the pension contributions. However, if an employer pays directly into an employee’s pension, neither employers nor employees pay NICs on the contribution. Some employers offer ‘salary sacrifice pension schemes’ to make tax-efficient use of this difference.

In a salary-sacrifice scheme, an employee agrees to reduce their salary and in return the employer contributes the reduced amount directly to the employee’s pension. Because an employee’s salary is lower when they are part of a salary-sacrifice scheme, both employee and employer pay lower NICs.

2025 Budget and the bill

The 2025 Budget announced that employer and employee NICs would be due on pension contributions above £2,000 a year made through salary sacrifice from 6 April 2029.

The National Insurance (Employer Contributions) Bill would enact the change announced in the Budget.

Forecast economic impact

In its 2025 Budget policy costings, the Treasury estimated that £32 billion of pension contributions had used salary-sacrifice arrangements in 2024.

The Office for Budget Responsibility estimates that charging NICs on salary-sacrificed pension contributions will raise £4.7 billion in 2029/30.