Salary-sacrifice pension contributions over £2k to face national insurance charge
Rachel Reeves has announced that salary-sacrificed pension contributions above an annual figure of £2,000 are to be subject to national insurance charges.
The move, which comes into effect in April 2029, is expected to raise more than £4bn in that financial year.
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The chancellor said the move was a “pragmatic step” that would protect those on low and middle incomes.
Salary sacrifice schemes for pensions are an arrangement by which employees can chose to give up a portion of their salary in exchange for their employer paying an equivalent amount into their pension.
The part of the salary that is given up is currently not subject to income tax or national insurance as it is taken out of a worker’s gross salary before the taxes are calculated.
The schemes also benefit employers, who do not have to pay national insurance on the amount sacrificed by the employee.
Some employers also choose to add this saving to their employee’s pension.
But under the new changes, contributions above £2,000 will be treated as ordinary employee pension contributions, and will therefore be subject to both employer and employee national insurance contributions.
The chancellor told the Commons that salary sacrifice for pensions was due to “treble in cost from £2.8bn in 2017 to £8bn by 2030”.
She said the “greatest benefit” was going to “higher earners or to those in the financial services sector putting their bonuses into pensions tax-free, while those on the minimum wage or whose employers don’t offer salary sacrifice don’t benefit at all”.
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Ms Reeves said: “This is not sustainable for the public finances, putting pressure on the tax everyone else pays, and so I am introducing a £2,000 cap on salary sacrifice into a pension with contributions above that taxed in the same way as other employee pension contributions.”
She added: “That is a pragmatic step so that people, especially on low and middle incomes, can continue to use salary sacrifice for their pension without paying any more tax than they do now. And to give individuals and employers time to adjust to these new arrangements, these changes will come into effect in 2029.”
The changes were outlined in a document written by the Office for Budget Responsibility (OBR) and released in error ahead of Ms Reeves’ speech.
The document said: “The policy results in an increase in NICs (national insurance contributions), which is estimated to raise £4.7bn in 2029/30 and £2.6bn in 2030/31.
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“The costing assumes that, in most cases, employee pension contributions above £2,000 that were part of a salary-sacrifice scheme will become subject to employer and employee NICs, either because they move to a standard pension scheme or continue in a salary-sacrifice scheme under the new tax arrangements.”
The Society of Pensions Professionals (SPP) said around a third of private sector employees use a salary-sacrifice arrangement, compared with almost 10% of public sector workers.
It said that while there was a £4bn cost to the government in providing salary sacrifice arrangements – £1.2bn for employees and £2.9bn for employers – there was also “widespread recognition that this is a positive investment that incentivises pension saving”.
The SPP said the change would affect basic rate taxpayers more than higher rate taxpayers because the main rate of national insurance contributions is 8% for employees, but only 2% on incomes above £50,270.
Steve Hitchiner, chair of the tax group at the SPP, said: “Abolishing salary sacrifice for pensions will affect the take-home pay of millions of employees – especially basic rate taxpayers – and is a tax on working people, in spirit if not in name. It is also another sizeable cost to employers and, perhaps most importantly, its removal will reduce pension saving.”
Representatives of European Union member states reached an agreement on Wednesday in the Council of the EU to move forward with the controversial “Chat Control” child sexual abuse regulation, which paves the way for new rules targeting abusive child sexual abuse material (CSAM) on messaging apps and other online services.
“Every year, millions of files are shared that depict the sexual abuse of children… This is completely unacceptable. Therefore, I’m glad that the member states have finally agreed on a way forward that includes a number of obligations for providers of communication services,” commented Danish Minister for Justice, Peter Hummelgaard.
The deal, which follows years of division and deadlock among member states and privacy groups, allows the legislative file to move into final talks with the European Parliament on when and how platforms can be required to scan user content for suspected child sexual abuse and grooming.
The existing CSAM framework is set to expire on April 3, 2026, and is on track to be replaced by the new legislation, pending detailed negotiations with European Parliament lawmakers.
EU Chat Control laws: What’s in and what’s out
In its latest draft, the Council maintains the core CSAM framework but modifies how platforms are encouraged to act. Online services would still have to assess how their products can be abused and adopt mitigation measures.
Service providers would also have to cooperate with a newly-established EU Centre on Child Sexual Abuse to support the implementation of the regulation, and face oversight from national authorities if they fall short.
While the latest Council text removes the explicit obligation of mandatory scanning of all private messages, the legal basis for “voluntary” CSAM detection is extended indefinitely. There are also calls for tougher risk obligations for platforms.
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A compromise that satisfies neither side
To end the Chat Control stalemate, a team of Danish negotiators in the Council worked to remove the most contentious element: the blanket mandatory scanning requirement. Under previous provisions, end-to-end encrypted services like Signal and WhatsApp would have been required to systematically search users’ messages for illegal material.
Yet, it’s a compromise that leaves both sides feeling shortchanged. Law enforcement officials warn that abusive content will still lurk in the corners of fully encrypted services, while digital rights groups argue that the deal still paves the way for broader monitoring of private communications and potential for mass surveillance, according to a Thusday Politico report.
Lead negotiator and Chair of the Committee on Civil Liberties, Justice and Home Affairs in the European Parliament, Javier Zarzalejos, urged both the Council and Parliament to enter negotiations at once. He stressed the importance of establishing a legislative framework to prevent and combat child sexual abuse online, while respecting encryption.
“I am committed to work with all political groups, the Commission, and member states in the Council in the coming months in order to agree on a legally sound and balanced legislative text that contributes to effectively prevent and combating child sexual abuse online,” he stated.
The Council celebrated the latest efforts to protect children from sexual abuse online; however, former Dutch Member of Parliament Rob Roos lambasted the Council for acting similarly to the “East German era, stripping 450 million EU citizens of their right to privacy.” He warned that Brussels was acting “behind closed doors,” and that “Europe risks sliding into digital authoritarianism.”
Telegram founder and CEO Pavel Durov pointed out that EU officials were exempt from having their messages monitored. He commented in a post on X, “The EU weaponizes people’s strong emotions about child protection to push mass surveillance and censorship. Their surveillance law proposals conveniently exempted EU officials from having their own messages scanned.”
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Privacy on trial in broader global crackdown
The latest movement on Chat Control lands in the middle of a broader global crackdown on privacy tools. European regulators and law‑enforcement agencies have pushed high‑profile cases against crypto privacy projects like Tornado Cash, while US authorities have targeted developers linked to Samurai Wallet over alleged money‑laundering and sanctions violations, thrusting privacy‑preserving software into the crosshairs.
In response, Ethereum co‑founder Vitalik Buterin doubled down on the right to privacy as a core value. He donated 128 ETH each (roughly $760,000) to decentralized messaging projects Session and SimpleX Chat, arguing their importance in “preserving our digital privacy.”
Session president Alexander Linton told Cointelegraph that regulatory and technical developments are “threatening the future of private messaging,” while co-founder Chris McCabe said the challenge was now about raising global awareness.
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Australia’s government has introduced a new bill that will regulate crypto platforms under existing financial services laws after an industry consultation saw cautious support for the legislation.
Assistant Treasurer Daniel Mulino introduced the Corporations Amendment (Digital Assets Framework) Bill 2025 on Wednesday, which would require crypto companies such as exchanges and custody providers to obtain an Australian Financial Services License (AFSL).
“Across the world, digital assets are reshaping finance,” Mulino told the House on Wednesday. “Australia must keep pace. If we get this right, we can attract investment, create jobs and position our financial system as a leader in innovation.”
The Treasury launched a consultation over a draft of the bill in September, which Mulino told crypto conferencegoers was “the cornerstone” of the Albanese Government’s crypto roadmap released in March.
The local crypto industry largely supported the draft legislation, but many told the consultation that the bill needed further clarity and simplification.
New bill to include safeguards for crypto held for clients
Mulino told the House it’s currently possible for a company to hold an unlimited amount of client crypto “without any financial law safeguards,” adding the risks of scams or frauds like FTX “cannot be ignored.”
“This bill responds to those challenges by reducing loopholes and ensuring comparable activities face comparable obligations, tailored to the digital asset ecosystem,” he said.
Currently, crypto platforms that simply facilitate trading only need to register with the Australian Transaction Reports and Analysis Centre, which has 400 registered crypto exchanges, many of which are inactive.
The legislation would focus on the companies that hold crypto for customers, “rather than the underlying technology itself,” Mulino added. “This means it can evolve as new forms of tokenisation and digital services emerge.”
Crypto bill adds two new license types, exempts small players
The bill amends the Corporations Act to create two new financial products, a “digital asset platform” and a “tokenized custody platform,” both of which will need an AFSL.
The license will register the platforms with the Australian Securities and Investments Commission. Currently, only exchanges that sell “financial products,” such as derivatives, must register.
Mulino said anyone “advising on, dealing in, or arranging for others to deal in” crypto will be treated as providing a financial service that requires a license.
Related: Australia risks ‘missed opportunity’ by shirking tokenization: Top regulator
Under the bill, crypto and custody platforms must meet ASIC’s minimum standards for transactions, settlements and holding customer assets. They must also give a guide to clients explaining their service, fees and risks.
Mulino said the bill exempts “small-scale” companies from licensing, those with less than 10 million Australian dollars ($6.5 million) in transaction volume in 12 months, along with those that deal or advise on platforms “incidental to their main, non-financial activities.”
The bill outlines an 18-month grace period on licensing, which Mulino said gives “relief for businesses trying to do the right thing.”
The bill is likely to quickly pass the House, where Prime Minister Anthony Albanese’s center-left Labor Party holds a 94-seat majority. It will then head to the Senate, where Labor may need the support of the crossbench and opposition to pass it.
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