Pension savers may reduce contributions after salary sacrifice changes

A December survey for Pensions UK found 28% of people in salary sacrifice schemes plan to increase contributions before rules change, while about 11% expect to reduce contributions once the change takes effect; the autumn budget makes salary-sacrificed pension contributions above £2,000 a year subject to national insurance from April 2029.

Pension savers in salary sacrifice schemes are reporting a range of responses after budget changes to how those contributions are treated for national insurance. A December survey for Pensions UK found some people want to boost contributions before the rules change, while others expect to cut contributions once the new arrangements apply. The autumn budget announced that salary-sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from national insurance. HM Revenue and Customs guidance says an estimated 7.7 million employees use salary sacrifice for pensions, of whom about 3.3 million sacrifice more than £2,000. Key facts: - 28% of people in salary sacrifice schemes said they expect to increase pension contributions before the change takes effect. - 3% planned to reduce contributions before the change, while 43% did not expect to change contributions ahead of the reform. - Around 11% said they expect to reduce pension contributions when the change takes effect. - The budget change will treat salary-sacrificed pension contributions above £2,000 a year as ordinary employee contributions for tax and subject them to national insurance from April 2029, according to HMRC guidance. Summary: The survey indicates many savers may shift the timing or size of contributions, with a noticeable share planning increases before the reform and a smaller share expecting cuts afterward. The policy will come into effect in April 2029; how employers and savers act beyond the survey is undetermined at this time.