Salary sacrifice threat with personal accounts

The future of salary sacrifice schemes could be under threat now that personal accounts have effectively been given the green light under the Pensions Act 2007, as more employers may move to salary sacrifice arrangements to help meet the cost of their contributions. Under personal accounts, it is proposed that there will be auto-enrolment and employers will have to contribute 3% to an employee’s pension from 2012. If large numbers of employers opt to pay via salary sacrifice the government will make huge losses in national insurance. Mark Polson, head of corporate business at Scottish Life, said: “It is absolutely possible that the government could close [salary sacrifice] for everything. If there is an explosion in salary sacrifice I could see this happening.”