The story that the pensions industry is trying to sell

A different perspective

Bryn Davies says:

March 1, 2026 at 7.32

“… it effectively added 29% more investment for the member’s contribution.”

It’s only going to be true if the employee and employer both use their NI saving to improve the member’s pension. I don’t know where this is true for any DB scheme; typically they both keep the savings. So the member just gains the relevant percentage of the sacrificed pay (8% or 2%) as an increase in take-home pay.

And is only true for some DC schemes. Does anyone have the figures, but my guess is that it’s only a minority of employers that pay their share of the saving into the member’s pension “pot”?

Reply

• • derekscott1953 says:

    March 1, 2026 at 7.32 (Edit)

    2023 research for HMRC

    

    You can read the Government research here
    Qualitative research not intended to be statistically representative of the wider population.

    Employers not offering salary sacrifice for pensions were asked why they did not offer it. Some said it was because of the additional administration required, some felt that the size of the business meant it was not worth it, and some did not know enough about it to offer it.

    Most employers that did offer it said, as you suspected Bryn, that they did not use the NI savings from the salary sacrifice arrangement to directly fund their workplace pensions, or to improve the generosity of the employer pension contributions.

    HMRC didn’t publish a summary of its research – based on data collected in summer 2023 and dated January 2024 – until May 2025.

    Salary sacrifice cost as NI relief increased markedly from £2.8 billion in forgone contributions in tax year 2016 to 2017, rising to £5.8 billion in tax year 2023 to 2024. Were no changes made, it was expected that this would nearly triple from 2016/17 to £8 billion by tax year 2030/31.

    * While 56% of users (approx. 4.3 million) are expected to be unaffected, around 3.3 million employees (44%) who sacrifice more than £2,000 will be impacted.
    * The proportion of organisations using salary sacrifice for pensions rose to 83% in 2025, up from 77% in 2023.
    * Following the 2024 Autumn Budget increases in NI, 43% of employers made changes to their benefits packages by introducing or adjusting salary sacrifice schemes.
    * While overall usage is high, adoption varies by employer size, mainly companies with 250+ employees using them, compared to smaller firms using them less.
    * 63% of employers expect to retain the NIC savings rather than pass them on to employee pensions.

    You can download this document here

The question is one of balance. We have to balance the cost of the health service , of the state pension and of benefits like pensions credit. It’s what funds a lot of what elderly people need a lot, but younger people maybe undervalue as they are healthy and working rather than relying on pension and benefits.

We have many people in the world of funded pensions and especially funded workplace DC pensions who have a particular interest in salary sacrifice as it encourages the pension savings to be paid into staff’s savings pots which will pay out in later years. For many of the well off, the state is not relied on for healthcare or for state pensions or benefits and consequently national insurance is money largely down the drain.

But national insurance is what keeps those on lower wages getting a great health service and a greater state pension and benefits where there is too little.

So let’s think twice before moaning that pensions are losing the wealthy an unneeded perk