Salary Sacrifice Raid: A Warning from Aviva Boss to Reeves
Aviva CEO Warns Against Taxing Workplace Salary Sacrifice Schemes
Aviva’s chief executive, Amanda Blanc, has raised concerns about a potential tax raid on workplace salary sacrifice schemes, warning that it could discourage people from saving for retirement and negatively impact the UK economy. Blanc urged Chancellor Rachel Reeves to carefully consider the implications of such a policy before including it in her upcoming Budget.
Blanc emphasized that targeting these schemes would not only penalize employers who contribute more to their employees’ pensions but also send a discouraging message to individuals who are saving for their future. “If you think about the fact that 15 million people in the UK are not saving enough, this is bad news long-term,” she said in an interview with The Times.
Recent reports suggest that Reeves is considering a move to tax salary sacrifice schemes to generate £2 billion annually. This move comes as part of efforts to address a £30 billion financial shortfall. Salary sacrifice schemes allow employees to exchange some of their pay for benefits like pension contributions or company cars, which are taxed at a lower rate.
This arrangement reduces both employee and employer national insurance payments. Currently, workers can contribute up to £60,000 per year into their pensions through these schemes. However, Reeves reportedly plans to reduce the cap to just £2,000 annually. Critics argue that this change would increase national insurance bills and could lead employers to be less generous in their pension contributions.
The proposal comes amid ongoing challenges for companies following a £25 billion cut to employer national insurance in Reeves’ previous Budget, which took effect in April. Blanc highlighted that removing the national insurance benefit from salary sacrifice would have a significant financial impact on employers.
Aviva’s New Targets and Cost-Saving Measures
In response to its £3.7 billion acquisition of rival Direct Line, Aviva has set new targets aimed at improving efficiency and profitability. The company now expects to achieve £225 million in cost savings by integrating the two businesses. These savings will come from areas such as technology, operations, and head office expenses.
Aviva also announced new earnings targets and plans to resume larger share buybacks next year. Despite these strategic moves, the company continues to anticipate that up to 2,300 jobs may be lost as part of its restructuring efforts.
Financial Performance and Market Reaction
Over the first nine months of this year, general insurance premiums increased by 12%, reaching £10 billion. Meanwhile, Aviva’s wealth business recorded £8.3 billion in net inflows.
Despite these positive developments, the company’s shares fell by 6.2%, or 42.6 pence, to 650 pence. Analysts attributed the drop to high investor expectations ahead of the latest financial update. Investors are closely watching how Aviva manages its cost-saving initiatives and whether they can deliver on their promises without negatively impacting employees or customers.
