A large number of UK workers are unaware of the salary sacrifice cap coming into force in 2029, despite it being one of the most widely used workplace benefits.
While nearly two thirds (62%) of workers use salary sacrifice, a similar number (63%) do not know it will be capped in 2029, says Barnett Waddingham.
From April 2029, the National Insurance savings on salary sacrifice for pension contributions will be capped at £2,000 a year.
The decision has attracted widespread industry criticism, with a vote by the House of Lords to increase the cap from £2,000 to £5,000 defeated in the House of Commons.
Barnett Waddingham’s research also showed how many workers are unclear on what salary sacrifice can be used for and how it could affect their finances.
A fifth (20%) of those surveyed believe it can only be used for pension contributions, despite it also being used for a range of other purposes, including childcare support and company car schemes. Nearly one in three (28%) said they were unsure whether it can be used to purchase a company car, while 20% did not believe childcare vouchers and nursery payments are included.
Understanding also varies across multiple aspects of how salary sacrifice works, from how it impacts take-home pay to misconceptions about whether it can bring your income below the National Minimum Wage.
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.
“There’s a balance to strike here. Salary sacrifice works best when it’s simple for workers to understand, and easy for employers to run. If that balance tips too far towards complexity, there’s a risk a well-used and effective benefit becomes less accessible than it should be.”
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