HMRC issues auto-enrolment salary sacrifice guidance

HMRC HAS ISSUED guidance confirming salary sacrifice pension schemes will be able to meet automatic enrolment requirements

Previously, HMRC required employees entering into salary sacrifice arrangement for pension contributions could not easily revert to their higher salary. A ruling that generally meant employees could not opt out within 12 months, unless it was due to a lifestyle change, without losing all tax and national insurance benefits, Accountancy Age’s sister publication Profession Pensions reports.

This conflicted with auto-enrolment regulations, which permit automatically enrolled individuals to opt out as soon as they have joined their pension.

HMRC has resolved this matter by adding pension contributions to the list of salary sacrifice schemes which allow opting out at any time.

Pension contributions now sit alongside child care vouchers, the cycle-to-work scheme and the workplace parking scheme in enjoying this level of flexibility.

Hargreaves Lansdown head of pensions research Tom McPhail explained: “Salary sacrifice arrangements for pensions have just been made more flexible, and can now happily comply with auto-enrolment regulations arriving from this year.”

This comes after the industry had lobbied HMRC to clarify the rules on this issue and include auto-enrolment as an exempt benefit – a move the government department had agreed to in April but has only now published guidance (PP Online, 17 April).

The guidance can be found on the HMRC website.

Related reading