Management Consulting
Aon
Full Credential Description
UK employers are facing increased costs due to the upcoming rise in employer National Insurance (NI) rates and a reduction in the lower threshold for NI contributions, effective April 2025. Aon identified that many businesses have not fully optimized their pension salary sacrifice arrangements, which could help mitigate these costs. Specifically, Aons 2024 DC Pension Scheme Survey revealed that 10% of employers are not utilizing salary sacrifice at all, often due to a lack of familiarity with UK pension and tax regulations, particularly among companies with overseas parent organizations. To address these issues, Aon proposed several tailored solutions. First, they recommended applying salary sacrifice to additional contributions, as many schemes only cover core employee contributions. This adjustment could significantly enhance savings. Second, Aon highlighted the potential for bonus sacrifice, noting that 40% of employers do not currently offer this option, which could lead to substantial cost reductions if communicated effectively to employees. Furthermore, Aon emphasized the importance of modern payroll automation, which allows for more flexible participation in salary sacrifice schemes, even for lower-earning employees who were previously excluded. Lastly, they suggested redundancy sacrifice as a strategy for employees nearing retirement, enabling them to contribute above the tax-free threshold into their pensions. Aon cautioned that improper management of salary sacrifice arrangements could lead to significant tax liabilities and compliance issues, particularly if employees are underpaid the minimum wage. They advised employers to review their arrangements proactively to ensure they are maximizing potential savings and remaining compliant with upcoming changes.