While April 2029 may seem a long way off, the planned restriction on National Insurance relief for salary sacrifice pension contributions is now firmly on the horizon.
 
Riding on the back-to-school vibe, now may be a good time to take steps to ensure your employees understand the future rule change and how it may affect them.

 Not least because FTAdviser reports that 63% of workers are oblivious to the fact that salary sacrifice will be capped at £2,000 in the next few years. [1]
 
Lesson 1: Recapping salary sacrifice basics
 
Salary sacrifice schemes allow employees to reduce their gross salary and divert more of their earnings to their workplace pension, or to cover some of the costs of perks, such as a company car or childcare vouchers.

Because the employee’s official gross pay is lowered, both employers and employees alike save on National Insurance contributions (NICs) on the sacrificed amount:

• Employees could save up to 8% (if their earnings fall between the primary threshold and the upper earnings limit) or 2% (if their earnings are above the upper earnings limit).
• Employers can save up to 15% (the standard employer rate above the secondary threshold).

Although some schemes offer multiple options, in our experience salary sacrifice is typically used to increase contributions to workplace pensions.

Lesson 2: National Insurance relief on salary sacrifice pension contributions will be capped at £2,000 from April 2029

Depending on the scheme rules, employees can currently sacrifice a significant proportion of their earnings into a pension. However, salary sacrifice cannot reduce pay below the National Minimum Wage and some employers may impose additional limits.

In May 2026, the Institute for Fiscal Studies (IFS) reported that 15% of employees make salary sacrifice contributions above £2,000. [2]
 
However, from April 2029, the amount employees can exchange for pension contributions (while still benefiting from National Insurance exemption) will be capped at £2,000.
 
Contributions through salary sacrifice will continue to be treated as other pension contributions and remain free of Income Tax, up to the Annual Allowance (£60,000 in 2026/27).

While both employers and employees can still opt to sacrifice more than £2,000, employee contributions above this amount will be subject to both employer and employee NICs.

Lesson 3: Employees may not understand their workplace pension as well as you think

You may think your employees understand their workplace pension and the value it can offer, but there’s a strong chance many aren’t as aware as you believe.

According to research, 96% of employers believe employees understand and value their workplace pension.
 
In fact, 39% of employees say they aren’t confident they’re making the right decisions around their pension, and a similar number have done nothing at all to engage with their workplace pension.
 
As Senior Corporate Benefits Consultant Rob Smith says, “There’s a clear disconnect between the rose-tinted naivety of some employers, thinking that they need to take no action for their employees because adding them to a scheme is enough, and the fact that 39% say it’s not – over a third haven’t even touched it!”

This is concerning enough, but with an estimated 15 million currently undersaving for their retirement, it’s more important than ever that employers take steps to ensure their workforce understands their workplace pension and all the surrounding benefits and rules. [3]
 
As pointed out in the FTAdviser article, the future salary sacrifice rule change “adds another layer of fine print to a system that already feels a bit opaque for most people”.

All this to say that now may be an ideal time to review how your salary sacrifice arrangements operate and model the future NIC impact on affected employees. It may also be wise to consider how you’ll communicate the incoming changes in light of your company’s financial wellbeing strategy.

Titan’s corporate benefits team are here to support you and your employees 

Armed with professional pension advice and an extensive library of financial literacy, we’re here to inform and educate your employees on retirement planning, savings strategies, and investment principles.
 
From bespoke pension schemes to one-to-one workplace advice, email info.wp@titanwh.com or call us on 0800 048 0150 to find out more.

Please note
This article is for information purposes only and does not constitute personal financial advice. If you are unsure about whether a particular course of action is suitable for you, we recommend that you seek independent financial advice.

The value of investments and the income from them can fall as well as rise, and you may get back less than you originally invested. Past performance is not a reliable indicator of future performance. Tax treatment depends on individual circumstances and may be subject to change in the future. Tax and estate planning outcomes are not guaranteed.

Workplace pensions are regulated by The Pensions Regulator.