Two thirds (63%) of workers currently using salary sacrifice are unaware that it will be capped from 2029, according to a new report.
Three in five (62%) workers are currently saving for retirement using salary sacrifice, according to the report from Barnett Waddingham.
The Pension Schemes Bill passed through Parliament earlier this week, progressing to Royal Assent, which will make the changes needed to limit how much can be paid through salary sacrifice without National Insurance being applied law from 2029.
Workers were also unaware that salary sacrifice can be used for other benefits beyond pension saving. A fifth (20%) of those surveyed for the report mistakenly belevied it can only be used for pension contributions, despite it also being used for a range of other benefits, including childcare support and company car schemes.
There was also widespread misconception about how salary sacrifice works:
- Two thirds (62%) thought salary sacrifice means taking home less money, not understanding that it is exchanged for benefits
- A quarter (23%) did not think salary sacrifice reduces tax or National Insurance, with a further 32% unsure
- A third (31%) were unaware that salary sacrifice can reduce mortgage borrowing capacity
- A fifth (20%) did not know childcare vouchers and nursery payments are available through salary sacrifice
- A quarter (28%) were unsure whether salary sacrifice can be used to purchase a company
Mark Futcher, head of DC pensions at Barnett Waddingham, said: “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.”
Censuswide surveyed 2002 employees in the UK between 29 January and 3 February on behalf of Barnett Waddingham.