More than a third (35%) of employers will review the impact of the government’s proposed changes to salary sacrifice arrangements nearer to when they take effect, according to research by Everywhen.
From April 2029, the UK government will cap the national insurance (NI) exemption on salary sacrifice pension contributions at £2,000 per year, meaning any pension contributions above £2,000 will incur NI.
The employee benefits firm’s survey of 500 UK HR decision makers also found that 48% of respondents currently offer salary sacrifice arrangments for pension contributions.
More than half (57%) currently share some, or all, NI savings with employees; these savings are kept in the business by 26%, and used to fund benefits platforms by 34%, or other employee benefits by 28%.
Post-April 2029, the 34% which currently fund their benefits platform from their NI savings will have to think about how they do so, while the 28% that currently fund other benefits from their NI savings will have to review how they do this.
A quarter (24%) of respondents said they will set a salary sacrifice arrangement up for the first time to take advantage of the savings, and 30% are planning to promote the benefits of their existing scheme.
Conversely, 18% said they will not make any changes in April 2029, 11% have not decided what they will do, and 4% do not know what to do.
Sorangi Shah, client director at Everywhen, said: “Utilising salary sacrifice for pension contributions is a great way for employees to maximise their investments. There are big benefits to be seen for higher-rate taxpayers, who enjoy full tax relief on pension contributions automatically via pension salary sacrifice, and those affected by tax traps for tapering of child benefit or personal allowance, and eligibility for tax-free childcare benefits.
“For employers which allow salary sacrifice for pension contributions, the message is: review it and don’t forget to budget for the impact the cap will have from 2029. Communicate the scheme to ensure everyone makes the most of it. For employers which don’t have salary sacrifice set up, the message is to set it up now and receive the higher savings while you can. From 2029, these schemes will still be attractive, just not quite as attractive as they are now.”
