Aviva chief executive Amanda Blanc has warned that a tax raid on workplace salary sacrifice schemes would put people off saving for retirement and be ‘bad news’ for Britain.
Blanc said Chancellor Rachel Reeves should ‘think very carefully’ before announcing such a policy in her Budget.
‘What you’re effectively doing is penalising those employers that actually contribute more to employees’ pensions,’ Blanc told The Times.
‘But you’re also saying to people who save for their pension that perhaps they shouldn’t do it, and I think that’s bad news long-term for the UK if you think about the fact that 15m people in the UK are not saving enough.’
Reports suggest Reeves is mulling a raid on salary sacrifice to raise £2billion a year, as she seeks to repair a financial black hole put at £30billion.
The scheme allows employees to ‘sacrifice’ some pay in exchange for other benefits such as pension contributions or a company car, before it is taxed.
Pension alert: Aviva chief executive Amanda Blanc said Chancellor Rachel Reeves should ‘think very carefully’ before launching a tax raid on workplace salary sacrifice schemes
It means employees and employers pay less national insurance. Currently, workers can put up to £60,000 a year into their pensions through salary sacrifice.
Reeves reportedly wants to reduce the cap to £2,000 a year. Critics say it will push up national insurance bills (NI) and is likely to mean employers are less generous in contributing to staff pension schemes.
It comes as companies are still grappling with a £25billion raid on employer national insurance in Reeves’ last Budget which came into force in April.
Blanc said: ‘The actual cost to employers of removing that NI benefit from salary sacrifice is not going to be insignificant.’
FTSE 100-listed Aviva set out new targets in the wake of its £3.7billion takeover of rival Direct Line. It now expects to make £225million of cost savings from combining the two firms.
The company also revealed new targets for earnings and said it would resume larger share buybacks next year. Blanc said savings would come in technology, operations and head office.
Aviva continues to expect this will mean shedding up to 2,300 jobs, as it has previously said.
General insurance premiums were up 12 per cent to £10billion over the first nine months of this year, and its wealth business generated £8.3billion of net inflows.
The shares fell 6.2 per cent, or 42.6p, to 650p. Analysts pointed to high investor expectations ahead of the update.
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