Major changes to the rules governing salary sacrifice pension schemes could lead to a significant shift in how Britons save for retirement, with some planning to boost contributions while others expect to cut back.
Survey Reveals Savers' Diverging Plans
Research commissioned by Pensions UK indicates that the upcoming reform is already influencing behaviour. The survey, conducted in December, found that 28% of people enrolled in salary sacrifice schemes intend to increase their pension contributions before the change takes effect.
In contrast, around one in ten (11%) said they expect to decrease their pension payments once the new rules are implemented. A further 43% do not plan to make any alterations, while some remain unsure of their course of action.
The changes, announced in the Autumn Budget, will mean that from April 2029, salary-sacrificed pension contributions above an annual £2,000 threshold will lose their exemption from National Insurance (NI). Contributions exceeding this amount will be treated as ordinary employee contributions and subject to NI.
Industry Warns of Complexity and Under-Saving
The move has drawn criticism from pensions and insurance bodies, who argue it creates new hurdles for savers. Matthew Blakstad, deputy director of strategic policy and research at Pensions UK, stated: "Salary sacrifice works. It helps people save more for the retirement they want while maintaining take home pay."
He highlighted a concerning knowledge gap, noting that many savers are unaware of the impending changes. "Confusion about the changes is widespread and risks undermining positive saving behaviours and confidence in the UK pension system," Blakstad added.
Justin Wray of the Association of British Insurers (ABI) echoed these concerns, calling the restrictions "counter-intuitive" at a time of widespread under-saving. "This double whammy puts us at risk of an even greater retirement crisis," he warned, suggesting both employers and employees may save less as a result.
The research also indicated that some savers may turn to alternative methods, such as Isas, cash savings, or paying off mortgages and debts earlier.
Government Defends "Fair Reforms"
A Treasury spokesperson defended the policy, stating that the cost of salary sacrifice was set to treble to £8 billion, largely benefiting higher earners. "Our fair reforms protect 95% of workers earning under £30,000 who use salary sacrifice," the spokesperson said, while allowing everyone to continue saving with unchanged tax relief on employer contributions.
According to recent HMRC guidance, an estimated 7.7 million employees currently use salary sacrifice for pensions, with 3.3 million sacrificing more than £2,000 of their salary or bonuses annually.
The survey was carried out by Yonder Consulting among more than 1,500 non-retired people in December 2025.
