Making the most of salary sacrifice – while it lasts

Recent government changes mean that salary sacrifice for pensions won’t stay as generous as it is today. While the rules won’t fully change until April 2029, there’s now a limited window for employers and employees to make the most of the current benefits.

What’s changing?

From April 2029, pension contributions made through salary sacrifice above £2,000 per year will start to attract National Insurance (NI) contributions.

• Employees could pay up to 8% more NI
• Employers could pay around 15% more NI

For some higher earners, the impact may be smaller – but for many employees, this change will reduce the overall efficiency of salary sacrifice.

Why act now?

Until April 2029, salary sacrifice remains a highly effective way to save on NI contributions. That means there’s a real opportunity over the next few years to:

• Maximise pension contributions efficiently
• Increase employee engagement with existing schemes
• Deliver meaningful savings for both employers and employees

Think of it as a “use it while you can” window.

What this means for employers

1. If you don’t yet offer salary sacrifice

If you’ve considered salary sacrifice before but haven’t implemented it, now is the time to act.

Putting a scheme in place sooner rather than later allows your employees to benefit from NI savings while the current rules still apply.

2. If you already have a scheme

Many employers already offer salary sacrifice – but participation isn’t always as high as it could be.

Now is a great time to:

• Revisit how the scheme is communicated
• Consider introducing Bonus Sacrifice too if you don’t offer this already
• Encourage more employees to take part
• Ensure everyone understands the value

If you’ve done the work to set it up, it makes sense to maximise its impact before 2029.

Timing could make a difference

In the run-up to April 2029, timing will become increasingly important.

For example:

• Bonus payments or one-off contributions made before 6 April 2029 could still benefit from current NI savings
• Payments made after this date may not

Planning ahead could result in significant savings, particularly for larger contributions.

Looking beyond 2029

Once the new rules come into force, employers may need to rethink how pension contributions are structured.

One likely shift is:

• Increasing employer pension contributions
• Reducing the amount employees need to contribute via salary sacrifice

Why? Because employer contributions are not subject to NI in the same way.

However, this approach may come with trade-offs, such as:

• Higher costs for employers
• Potential pressure on future pay rises

Clear communication will be key – especially if enhanced pension contributions are positioned as part of the overall reward package.

A potential change for employees

If some employers decide to move away from salary sacrifice altogether, employees may notice a difference in how pension tax relief works.

Currently, salary sacrifice means:

• Full tax relief is applied automatically through payroll

Without it, many schemes use “relief at source”, where:

• Basic rate tax relief is applied automatically
• Higher-rate taxpayers must claim additional relief themselves

This is an important point – employees may need guidance to ensure they don’t miss out.

How we can help

With changes on the horizon, now is the time to review your approach to salary sacrifice and pension contributions.

At Corpad Employee Benefits Limited, we’re here to help you:

• Understand what these changes mean for your business
• Review your current arrangements
• Identify opportunities before April 2029
• Communicate clearly with your employees

If you’d like to discuss how to make the most of salary sacrifice while it lasts, get in touch with us at:

ceb@corpad.co.uk