Changes to SMART – but only from 2029

Many colleagues use SMART to pay their pension contributions because it reduces how much National Insurance they pay. 

If you’re a middle or higher-income earner, you might get a bit less take-home pay from April 2029, because the Government plans to change the rules around how salary sacrifice schemes like SMART work. 

Here’s what you need to know: 

1. SMART savings are only a small part of the money you save on your SRSP contributions. You will still get income tax relief, so paying into a pension remains a tax-efficient way of saving for retirement. 
2. From April 2029, if you pay more than £2,000 into your pension through SMART, any money over this £2,000 cap will be considered an ordinary, ‘non-SMART’ employee contribution, so you’ll pay National Insurance on this money. So will Sainsbury’s. 
3. Most people won’t be affected by the changes as they don’t pay enough into their pension. 

Example 

• Sam earns £40,000 a year and pays a Step Up contribution of 5% into the SRSP – a total of £2,000, so they’re at the salary sacrifice limit. 
• Sam decides to pay in another 1% into their pension – an extra £400. 
• They’d still get full tax relief on this extra contribution, saving them £80, but they wouldn’t get the £32 National Insurance saving they would’ve had before. 

Want to know more?
L&G have an article on their website about the Budget and what it means for pensions, retirement and tax planning.