Aviva chief executive Dame Amanda Blanc called on the Chancellor to reconsider plans for a comprehensive crackdown on pay sacrifice schemes. She warned that the move would disadvantage both employers and employees while hurting long-term pension savings across the UK.
Ahead of Rachel Reeves’ budget on November 26, Blanc said Aviva was “very concerned” about the Treasury’s intention to limit the amount workers can sacrifice tax-free to just £2,000 a year – a change expected to raise around £2bn a year.
With salary sacrifice, employees can forego part of their gross salary and receive pension contributions or other benefits in return. Because the contribution is made before tax and National Insurance (NI), both individuals and employers save on NI payments. Currently, the scheme allows employees to pay up to £60,000 a year into their pensions tax-free.
But pensions experts warn that Reeves’ proposed cap would sharply increase NI bills for employers and employees, likely leading to many companies reducing the generosity of their pension contributions.
“What you are effectively doing is penalizing those employers who actually contribute more to employees’ pensions,” Blanc said. “And you’re also signaling to people who are saving for their pension that maybe they shouldn’t be doing it. That’s bad news for the UK in the long term, especially when 15 million people are already not saving enough for retirement.”
The move would also be a second NI hit for companies in just over a year. Reeves increased employer NI in her first budget last October – a decision that drew strong criticism from business leaders.
Blanc warned that abolishing the NI benefit entirely would impose significant costs on businesses: “The real cost to employers of abolishing this NI benefit in terms of salary losses will not be insignificant.”
Her comments came as Aviva delivered a strong third quarter update. The FTSE 100 insurer said it now expects to make annual cost savings of £225m by 2028 from the £3.7bn acquisition of Direct Line – almost double the £125m previously forecast.
Aviva also expects to make an operating profit of £2.2bn this year, excluding any contribution from Direct Line. This means the company is expected to hit its 2026 profit target two years early. New three-year targets were also unveiled, including achieving a return on equity of more than 20% by 2028.
Analysts at Bank of America reiterated their “buy” rating on Aviva, saying they expect the insurer to exceed its newly updated financial targets.
Despite the strong forecast, Aviva shares fell 42.5p – down 6.1% – to close at 650p. The stock is up about 40% since the start of the year, with analysts suspecting that many of the upgrades announced Thursday had already been priced in by investors.
