Pension - Upcoming Salary Sacrifice Changes

PENSION – SALARY SACRAFICE

Upcoming change to pension salary sacrifice – what employees, agency workers & employers should know.

A heads-up on future pensions changes that’s worth having on the radar if you’re contributing to a workplace pension via salary sacrifice.

The UK Government has confirmed plans to limit the National Insurance (NI) advantage of pension salary sacrifice arrangements.

What’s changing

• From 6 April 2029, the NI exemption on pension contributions made via salary sacrifice will be capped at £2,000 per year
• Contributions above £2,000 will still benefit from Income Tax relief
• However, employee and employer NI will apply to the excess amount

 Why this matters

• Salary sacrifice has been popular because it reduces both tax and NI
• This change reduces the NI efficiency for higher pension contributions
• Take-home pay and employer pension costs could be affected over time

 Who should pay attention

• Employees making higher pension contributions
• Agency workers and contractors using salary sacrifice schemes
• Employers and clients offering salary sacrifice as part of reward or assignment packages

 What to consider

• This is not an immediate change - there is time to plan
• Reviewing pension contribution levels closer to 2029 will be sensible
• Employers may want to review how pension benefits are structured and communicated
• Individuals should consider independent financial advice before making changes

While this won’t affect everyone, it’s another reminder that long-term reward planning needs regular review, especially as tax and NI rules evolve.