Budget 2025 - Salary Sacrifice Change for Pension Savings

26th November 2025

A third of private sector employees and a tenth of public sector workers use a salary sacrifice scheme for their pension savings.

These workers give up a portion of their salary in return for their employer paying the equivalent amount into their pension. The benefit to both employer and employee is that they make savings in national insurance.

A £2,000-a-year cap on the amount that can be put into pensions through this salary sacrifice arrangement will be in place from April 2029. More can be put in, but it will be taxed.

Employees would still get income tax relief on their pension contributions, external, but some argue the move will reduce pension saving incentives.

Mainly people making Salary sacrifice for pensions are in higher income brackets.