Almost two third of workers in the UK currently use salary sacrifice – but the majority are unaware this will be restricted from 2029, according to new research.
Barnett Waddingham, now part of Howden, says many workers in the UK are still unclear on how salary sacrifice works – despite it being one of the most widely used workplace benefits.
Overall it found that almost one in 10 workers do not know what salary sacrifice is, with almost two thirds unaware of proposed changes to limit the amount of national insurance that can be saved.
The proposed rule changes is currently being debated in Parliament.
The findings highlight common misconceptions around salary sacrifice, with one in five (20 per cent) of those surveyed wrongly believing it can only be used for pension contributions, despite the fact it can be used for other benefits, including childcare support and company car schemes.
Barnett Waddingham tea of DC pensions Mark Futcher says: “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.
“Adding a cap, regardless of the amount, adds another layer of fine print to a system that already feels a bit opaque for most people. And when the rules become harder to understand, people are more likely to step back than engage – a risk we can’t really afford to take at a time when retirement adequacy is already under pressure.
“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.”
