{"id":6832,"date":"2026-02-11T09:18:37","date_gmt":"2026-02-11T09:18:37","guid":{"rendered":"https:\/\/www.bainesjewitt.co.uk\/blog\/?p=6832"},"modified":"2026-02-11T09:18:40","modified_gmt":"2026-02-11T09:18:40","slug":"salary-sacrifice-pension-rules-are-changing-who-pays-the-price","status":"publish","type":"post","link":"https:\/\/www.bainesjewitt.co.uk\/blog\/salary-sacrifice-pension-rules-are-changing-who-pays-the-price\/","title":{"rendered":"Salary sacrifice pension rules are changing: Who pays the price?"},"content":{"rendered":"

Salary sacrifice has long been one of the most tax-efficient ways to save into a workplace pension.<\/p>\n

<\/p>\n

However, those benefits are set to be reduced following the changes announced in the Autumn Budget 2025.<\/p>\n

While the reforms are still a few years away, employers and employees must understand what the new rules mean for them and allow enough time to prepare.<\/p>\n

What is changing around salary sacrifice?<\/strong><\/h3>\n

Under the current system, pension contributions made through salary sacrifice are exempt from Income Tax and National Insurance Contributions (NICs).<\/p>\n

This applies to employees and employers and makes salary sacrifice a valuable way to increase your pension savings and reduce payroll costs.<\/p>\n

However, from April 2029, this will all change.<\/p>\n

The Budget announced that only the first \u00a32,000 per year of pension contributions made through salary sacrifice will remain exempt from NICs.<\/p>\n

Any amount sacrificed above this level will be subject to employee and employer NICs, although all pension contributions will continue to receive full Income Tax relief.<\/p>\n

How will this affect employees? <\/strong><\/h3>\n

A recent OBR analysis<\/a> indicated that around 4.3 million more people than expected will feel the impact of the cap.<\/p>\n

Employees who sacrifice more than \u00a32,000 each year will see NIC deducted on the excess and could reduce their take-home pay compared to the current rules.<\/p>\n

Lower and middle earners may feel the impact more. Those earning below the higher-rate tax threshold could pay NIC at up to eight per cent on contributions above the cap, while higher earners will pay two per cent.<\/p>\n

However, pensions will still be an effective way to reduce adjusted net income and help people avoid higher-rate tax and the \u00a3100,000 personal allowance taper.<\/p>\n

How will this affect employers?<\/strong><\/h3>\n

From April 2029, employers will pay employer NICs on salary sacrifice pension contributions above \u00a32,000, which could potentially increase payroll costs.<\/p>\n

Businesses that match employee contributions above the minimum level or share their employer NIC savings through greater pension contributions may find these arrangements become more expensive.<\/p>\n

Some employers may need to reconsider their contribution structures and bonus sacrifice arrangements ahead of the implementation.<\/p>\n

Any changes made must be handled carefully and employees must be fully informed, as pension and salary sacrifice arrangements are often included in employment contracts.<\/p>\n

Employers will need to reassess the financial implications on their payroll and seek financial support to review the impact on their cash flow.<\/p>\n

What should you be doing now to prepare?<\/strong><\/h3>\n

Although the salary sacrifice changes may feel far away, waiting until the last minute could limit your options.<\/p>\n

Employees should be reviewing how much they contribute to their pension and potentially increase contributions while the full NI relief is still available.<\/p>\n

However, any changes should be made carefully as salary sacrifice reduces contractual pay.<\/p>\n

Businesses and employers should begin modelling the financial impact of the employer NIC being applied to salary sacrifice contributions above \u00a32,000.<\/p>\n

This includes reviewing contribution matching policies, bonus sacrifice arrangements and whether current pension contributions are sustainable once the new rules apply.<\/p>\n

Clear communication is just as important as financial planning, as employees are likely to have questions over how the reforms will affect their take-home pay and retirement savings.<\/p>\n

How can we help?<\/strong><\/h3>\n

The salary sacrifice reforms are not coming into effect for a few years and it is possible that further changes could be made before then.<\/p>\n

With the right financial support, you can make informed decisions on your pension contributions and understand how they affect your long-term financial planning and workplace pension schemes.<\/p>\n

We can help employees assess how the cap will affect take-home pay and support employers with cost modelling and compliance.<\/p>\n

For further advice and support on the salary sacrifice changes, contact our team today.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Salary sacrifice has long been one of the most tax-efficient ways to save into a workplace pension.<\/p>\n","protected":false},"author":2,"featured_media":6835,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24,125],"tags":[],"_links":{"self":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6832"}],"collection":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=6832"}],"version-history":[{"count":1,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6832\/revisions"}],"predecessor-version":[{"id":6833,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/6832\/revisions\/6833"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media\/6835"}],"wp:attachment":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=6832"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=6832"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=6832"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}