National Insurance Contributions (Employer Pensions Contributions) Bill: Lords warn of pension saving impact as Bill advances to Grand Committee Stage
The House of Lords gave the National Insurance Contributions (Employer Pensions Contributions) Bill a Second Reading on 4 February 2026, with debate focused on Clause 1, which would introduce a £2,000 annual cap on pension contributions made through salary sacrifice, that are currently exempt from employer and employee national insurance contributions (NICs), applying NICs above the cap from the tax year 2029–30. Lord Livermore, for the government, said the reform was necessary to address the projected growth in the cost of pension salary sacrifice to £8bn a year, which he said was driven largely by higher and additional rate taxpayers, while many lower earners and the self-employed could not access the relief. He said the cap would protect ordinary workers, give employers over three years to prepare, and preserve income tax relief on all pension contributions, with the Office for Budget Responsibility not expecting a material impact on overall pension saving. No amendments were moved during the Second Reading debate , the Bill was read a second time and committed to the Grand Committee, where peers indicated that detailed operational and behavioural issues would be examined further. The Grand Committee is currently scheduled to examine the Bill on 24 and 26 February 2026.