HMRC Salary Sacrifice Loophole Allows Workers to Double Pension Allowance to £4,000

A salary sacrifice loophole now permits workers holding multiple jobs to double their pension contribution allowance to £4,000 annually. According to a recent confirmation from Lord Livermore, the Financial Secretary to the Treasury, the £2,000 pension contribution cap applies on a per-job basis rather than per individual taxpayer.

This means that employees with two jobs can contribute up to £4,000 a year towards their pension through salary sacrifice arrangements, while those with three jobs could potentially contribute £6,000. Baroness Altmann, former Conservative Pensions Minister, noted this development addresses only part of the pension policy’s complexity, calling the cap “unworkable” and warning that the loophole may be exploited by negotiating employment across different companies within the same group.

Critics have voiced concern over the fast-tracked legislation, with Baroness Altmann urging the Labour government to delay the bill for further scrutiny. Sir Steve Webb, ex-Pensions Minister known for creating the Triple Lock, highlighted the potential negative consequences for workers and businesses, including the possibility that some companies might abandon salary sacrifice altogether or reduce wages and pensions to offset extra tax costs.

A spokesperson from HM Treasury defended the policy, stating that salary sacrifice costs were projected to triple to £8 billion as high earners used bonuses to avoid tax, a taxpayer-funded advantage primarily benefiting wealthier individuals.