Pension contributions and childcare vouchers most popular tax-efficient benefits

Pension contributions via salary sacrifice and childcare vouchers are the most commonly offered tax-efficient benefits via a salary sacrifice arrangement, according to the Benefits Research 2014, which surveyed 256 respondents in March 2014.

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Salary sacrifice pension contributions remain popular. This year, 87% of employers that offer benefits via salary sacrifice enable staff to make contributions in this way, either through a voluntary or flexible benefits scheme.

In 2009, just 44% of respondents that offered benefits via salary sacrifice enabled staff to make pension contributions in this way, rising to 61% in 2011 and 91% in 2013.

In part, this rise may be attributed to the introduction of pensions auto-enrolment, with a large number of employers now having reached their staging dates.

Childcare vouchers also remain a perennial favourite among employers that offer tax-efficient benefits via salary sacrifice arrangements, having been the most common tax-efficient benefit offered in this way since 2009.

This year, it appears that some employers offer vouchers both through a flexible benefits scheme and on a voluntary basis, possibly to give staff maximum choice and flexibility.

However, this looks set to change. From autumn 2015, childcare vouchers will be phased out as schemes close to new entrants and the existing childcare voucher scheme will be replaced by the government’s new tax-free childcare scheme, which will provide working families with up to 20% of their childcare costs, up to £2,000 per child.

Overall, the number of employers that enable staff to access benefits via salary sacrifice arrangements has increased steadily since 2004. This is unsurprising given the tax and national insurance savings this brings for both employers and employees, which have proved popular, particularly during the tough economic times over the past seven years.

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Read more findings from The Benefits Research 2014