Blog

Salary sacrifice and pensions: what the Autumn Budget could mean for employers

calendar icon 03 October 2025
time icon 4 min

Authors

Hannah English
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Hannah English

Head of DC Corporate Consulting

Susan Waites
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Susan Waites

Partner

With rumours circulating about the future of salary sacrifice, what could be the impact on pensions if the government decide to target this tax provision?

As speculation grows around the future of salary sacrifice, many reward and benefits professionals are asking what potential changes could mean for pension arrangements as we approach the Autumn Budget.

Salary sacrifice has long been valued as a tax-efficient mechanism, benefiting both employers and employees. It also plays a significant role in pension contributions across the UK. At Hymans Robertson, our data shows that an overwhelming 95% of our clients have adopted salary sacrifice arrangements for pension contributions. This reflects the widespread popularity and acknowledged tax advantages.

However, there's a growing focus on how the Chancellor may raise money at her next budget. The release of a government research paper in the early summer explored attitudes to salary sacrifice and tested employer reactions to three hypothetical scenarios, in which the benefit might be reduced. Concerns are now mounting as to potential government action. When we asked our clients who do offer salary sacrifice about possible changes, approximately 50% expressed concern about the impact on their arrangements. They indicated that they would need to re-evaluate their pension scheme design if the government were to target this provision.

Concerns also extended beyond increased costs. Where employers currently share National Insurance (NI) savings with staff, there's apprehension that any reduction or removal of NI savings could diminish future retirement savings for employees. Many also view the ability to offer salary sacrifice as an appreciated and valued benefit; in some cases, staff have actively requested its implementation. A change here could risk impacting employee morale, particularly among those who value the scheme most.

What should employers be considering?

For now, salary sacrifice continues to provide an efficient path for making pension contributions. While any changes would likely be accompanied by a reasonable lead-in period to allow for payroll and administrative adjustments, employers should start considering the possible implications now.

In the absence of immediate changes, employers should consider:

  • Do you and your internal stakeholders fully understand salary sacrifice and the potential benefits it offers?
  • If you already offer salary sacrifice, is it being used to its full potential across your organisation?
  • How are you currently using the employer NI savings generated through salary sacrifice? Are you sharing them with employees, re-investing, or using them elsewhere?
  • If you don't automatically enrol employees into salary sacrifice, could you do more to inform them of its advantages?

As the landscape evolves, keeping an open line of communication with your teams (financial/ payroll etc) and staying informed about potential regulatory changes is crucial.

If you’d like to explore what potential changes to salary sacrifice could mean for your pension arrangements, get in touch with our team. We can help you understand the risks, weigh up your options, and keep your organisation ready for what’s ahead.

This article was first published by REBA.

 

This blog is based upon our understanding of events as at the date of publication. It is a general summary of topical matters and should not be regarded as financial advice. It should not be considered a substitute for professional advice on specific circumstances and objectives. Where this blog refers to legal matters please note that Hymans Robertson LLP is not qualified to provide legal opinion and therefore you may wish to obtain independent legal advice to consider any relevant law and/or regulation. Please read our Terms of Use - Hymans Robertson. 

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