Future changes to salary sacrifice remain under the radar
| Around two-thirds of UK employees currently use salary sacrifice arrangements to boost pension contributions | For many people, higher earners in particular, salary sacrifice forms an important part of long-term retirement planning | While the proposed changes remain years away, understanding how they may affect future contributions can help inform decisions today |
Salary sacrifice has become a familiar feature of workplace financial planning, where employers pay part of a salary directly into an employee’s pension, meaning Income Tax or employee National Insurance (NI) is not payable on that amount. However, new research suggests many people may be unaware of significant changes planned for the years ahead.
Awareness remains low
Although around two-thirds of UK employees currently use salary sacrifice arrangements, research1 found that 63% are unaware of the government’s proposed cap due to be introduced in 2029.
The findings come shortly after the National Insurance Contributions Bill became law and highlight a broader issue: many employees may not fully understand how future policy changes could affect their pensions and workplace benefits.
Why it matters
Salary sacrifice can be an effective way to boost pension contributions while reducing tax and National Insurance liabilities. For many higher earners in particular, it forms an important part of long-term retirement planning.
While the proposed changes remain some years away, understanding how they may affect future contributions can help individuals make more informed decisions today.
Keeping informed
If you would like to discuss how salary sacrifice fits into your overall financial plan, please get in touch.
A recap of what’s changing
- Only the first £2,000 per year of pension contributions made via salary sacrifice will be exempt from NI from April 2029
- Any amount above this will still receive Income Tax relief, but NI will be payable
- Contributions made between now and 2029 continue to benefit from full NI efficiency, making this a valuable window of opportunity.
1Barnett Waddingham 2026
It is important to take professional advice before making any decision relating to your personal finances. Information within this article is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored advice and is for guidance only. Some rules may vary in different parts of the UK.
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