A significant number of UK employees remain uncertain about how salary sacrifice works, even though nearly two-thirds (62%) already use it, according to research by Barnett Waddingham, part of Howden.
Its survey of more than 2,000 staff at medium and large employers also suggests widespread confusion about what salary sacrifice can cover and how it affects take‑home pay. One in five respondents thought it applies only to pension contributions, despite its use for other benefits such as childcare support and company car arrangements. Misunderstandings also persist around issues like the national minimum wage and the impact on overall income.
Almost two‑thirds of those surveyed were unaware that from 2029 the amount eligible for national insurance relief will be capped.
The findings follow the National Insurance Contributions (Employer Pensions Contributions) Act 2026 becoming law, bringing in a future limit on how much salary can be sacrificed before national insurance applies.
Mark Futcher, head of DC pensions at Barnett Waddingham, said: “For a benefit so widely used, most people are still using salary sacrifice on autopilot without knowing what’s going on under the bonnet. For something that can make a big difference to people’s long-term savings, that gap really matters.”
He added that introducing a cap “adds another layer of fine print to a system that already feels a bit opaque for most people”, warning that greater complexity could discourage engagement at a time when retirement outcomes are already under strain.
From April 2029, national insurance savings on pension‑related salary sacrifice will be limited to £2,000 a year, after MPs rejected a proposal from the House of Lords to raise the threshold to £5,000. Employers will be required to report total sacrificed amounts through their payroll systems, with further guidance expected from HM Revenue and Customs.
Futcher added: “There’s a balance to strike here. Salary sacrifice works best when it’s simple for workers to understand, and easy for employers to run. If that balance tips too far towards complexity, there’s a risk a well-used and effective benefit becomes less accessible than it should be.”
This article is based on a piece written for Personnel Today
