National Insurance Contributions (Employer Pensions Contributions) Bill: Third Reading

Parliament passed the National Insurance Contributions (Employer Pensions Contributions) Bill at Third Reading on 21 January 2026 by 316 votes to 194. The Bill applies Class 1 National Insurance contributions to amounts of salary sacrificed for pension contributions above £2,000 per year, taking effect from the 2029-30 tax year. Salary sacrifice arrangements up to that threshold remain exempt, and the income tax treatment of pension contributions is unchanged. The measure matters because salary sacrifice pension schemes are used by an estimated 7.7 million employees, roughly a quarter of the workforce, and around 3.3 million of those sacrifice more than £2,000 per year. By making the arrangement more expensive above that threshold, the Bill raises revenue for the Treasury but critics argued it reduces the financial incentive for middle earners to save more for retirement. The £2,000 threshold can be adjusted by the Treasury through secondary legislation, with any reduction requiring Parliament's approval under the affirmative procedure. The vote divided almost entirely along party lines. Labour and Labour and Co-operative MPs provided all 310 votes on the government side, joined by four Green MPs and two independents. Every Conservative, Liberal Democrat, SNP, DUP, Plaid Cymru, and Reform UK MP who voted did so against. Opponents moved amendments in Committee, including one that would have exempted basic-rate taxpayers from the cap and another requiring the £2,000 threshold to rise with inflation; neither passed. The Bill sits alongside a broader pattern of pension-related votes, with Labour also defeating Lords amendments to the Pension Schemes Bill in April 2026.