Britain’s economic growth and insurance sector face mounting pressures, with industry leaders urging reform after Chancellor Rachel Reeves’ Autumn Budget.
The Association of British Insurers (ABI) has cautioned that changes to the salary sacrifice pension scheme outlined in Chancellor Rachel Reeves' second Budget could undermine retirement savings and investor confidnece.
ABI director general Hannah Gurga (pictured, left) said the government faces difficult economic decisions but stressed that long-term policy stability is crucial for savers and the insurance industry.
"The changes to the salary sacrifice scheme are disappointing, especially at a time when we need to be encouraging people to save," she said. Gurga noted that the 2029 implementation date provides employers and payroll providers time to adapt, but warned the policy risks pushing millions into poorer retirements.
Yvonne Braun (pictured, right), ABI director of policy for long term savings, health & protection, described capping salary sacrifice as a “short-sighted tax grab” that could reduce pension saving and weaken retirement security. She added that it conflicts with government goals to scale pensions to drive greater investment into UK businesses and infrastructure.
"While it's encouraging that employers and payroll providers will have until 2029 to make the necessary changes to their systems, the wider work required to rebuild people's trust in the stability of pensions will take years," Braun added.
On Wednesday, Chancellor Rachel Reeves delivered her second Budget, unveiling tax and spending measures with far-reaching effects for insurers, brokers, and their clients. Based on the second Budget, national insurance will be payable on contributions above £2,000 from 2029, a change that may alter the design of employee benefits and group pension schemes.
Insurance Premium Tax (IPT) remains unchanged at 12% for health policies and 20% for travel insurance, a decision criticised by industry leaders. The Office for Budget Responsibility projects IPT will raise £56.07 billion between 2024/25 and 2029/30, slightly down from previous estimates, reaching £10.1 billion in 2030/31.
Cara Spinks, head of life & health at consultancy Broadstone, said keeping IPT at current levels misses a chance to encourage uptake of private health insurance and support workforce productivity.
"The Chancellor has overlooked a clear opportunity to support the recommendations of the Keep Britain Working review, by encouraging take up of private health insurance products through reducing or removing Insurance Premium Tax for employers and individuals," she said.
Jo Wynyard, commercial director at PayingTooMuch, noted the effect on travel insurance.
“The Chancellor’s decision to keep travel insurance IPT at 20% is another blow to people’s finances. With travel costs already soaring, she ignored a simple way to help families by cutting this punitive tax," Wynyard said.
The comments underline the wider impact of the Budget on the insurance sector, which will need to guide employers and individuals through changes, adapt product offerings, and continue providing advice on tax-efficient solutions and long-term risk management.
