Rachel Reeves is preparing to impose restrictions on salary sacrifice arrangements, targeting both cycle-to-work purchases and pension contributions in her forthcoming Budget on November 26.
The Labour Chancellor’s proposals would establish new spending limits for bicycle purchases through workplace schemes and potentially cap pension contribution relief, according to Government sources familiar with the preparations.
These measures have prompted serious concerns about retirement security across Britain.
The Association of British Insurers has issued stark warnings that the proposed changes could jeopardise millions of workers’ financial futures.
The reforms represent a significant shift in tax policy that could affect both immediate transport choices and long-term retirement planning for employees across the income spectrum.
Fresh polling by the ABI reveals that two-in-five British workers would decrease their pension contributions if the Government caps salary sacrifice benefits.
The research, conducted with Opinium Research, highlights the potential impact on retirement savings nationwide.
Under existing regulations, employees can contribute up to £60,000 annually to their pensions via salary sacrifice.
Chancellor Rachel Reeves is set to tighten salary sacrifice rules in the Budget, affecting cycle-to-work schemes and pension contributions
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GETTY
These arrangements provide tax relief at the contributor’s income tax rate, while both workers and employers avoid National Insurance charges on these amounts.
Previous ABI and REBA research found that nearly half of employers paying above minimum pension levels would contemplate reducing their contributions if National Insurance taxation were applied to employer pension payments.
Such reductions would mean less capital flowing into UK investments, given that pension providers rank among Britain’s most substantial investors.
The erosion of confidence in Britain’s pension system has reached alarming levels.
Only 26 per cent of adults express confidence in retirement saving amid ongoing speculation about reforms
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GETTYOnly 26 per cent of adults express confidence in retirement saving amid ongoing speculation about reforms, while 46 per cent doubt Government pension plans will benefit their retirement prospects.
Yvonne Braun, director of policy for long-term savings at the ABI, said: “The constant speculation about changes to pensions tax is eroding trust in the pensions system and risks making a bad situation worse.”
Lily Megson-Harvey, policy director at My Pension Expert, said: “This is a moment for the Government to show leadership on long-term financial wellbeing, not just by protecting existing schemes, but by investing in education, support, and incentives that help more people take control of their financial futures.”
The cycle-to-work scheme faces particular scrutiny, with ministers planning to restrict spending on bicycles purchased through the tax-advantaged programme.
Government insiders justify the move as preventing wealthy individuals from claiming tax relief on expensive leisure equipment
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GETTYGovernment insiders justify the move as preventing wealthy individuals from claiming tax relief on expensive leisure equipment.
A Government source told the Financial Times: “Cycle to work should be about helping ordinary commuters switch to greener travel, not giving tax breaks to high earners buying £4,000 e-bikes for weekend rides in the Surrey Hills.”
The bicycle industry has expressed dismay at the proposals.
Will Pearson, co-owner of Pearson Cycles in London, said that quality bicycles command higher prices but deliver better reliability and efficiency.
He urged ministers to enhance rather than restrict incentives, warning that limitations could hamper progress towards environmentally sustainable transport options.
