National Insurance Contributions (Employer Pensions Contributions) Bill: HL Bill 164 of 2024–26

Approximate time to read: 13 minutes

The National Insurance Contributions (Employer Pensions Contributions) Bill is a short, three clause government bill introduced in the House of Lords on 22 January 2026. It is due to have its second reading on 4 February 2026.

The bill would give effect to the government’s policy, announced at the November 2025 budget, to abolish national insurance contributions (NICs) tax relief on employer salary sacrifice pensions contributions above £2,000 per year per employee. The bill would provide for future regulations to apply employee and employer NICs to salary sacrifice pensions contributions above this new threshold. The change would take effect from April 2029.

Currently, both employee and employer pay NICs on pensions contributions when an employee pays into their pension. However, if an employer pays directly into an employee’s pension, neither the employer nor the employee pays NICs on the contribution.

Some employers offer salary sacrifice pension schemes to make tax-efficient use of this difference. In these schemes an employee agrees to reduce their salary and in return the employer contributes the reduced amount directly to the employee’s pension. As the employee’s salary is lower when they are part of a salary sacrifice scheme, both employee and employer pay lower NICs.

The government has claimed that NICs tax relief on salary sacrifice pensions contributions disproportionately benefits higher earners. The government has also said the cost of the relief has increased in recent years and was set to be £8bn a year by 2030/31 without reform. The Treasury has estimated the reforms in the bill would generate revenue of £4.8bn in 2029/30, but this would reduce to £2.6bn in 2030/31 due to behavioural changes.

Opposition parties objected to the bill during its House of Commons stages, but it ultimately passed without amendment.