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- New Standard Life Centre for the Future of Retirement research finds two in five (39%) employers offering salary or bonus sacrifice schemes are less likely to provide the scheme when the National Insurance relief cap comes into force
- One in 10 (11%) have already decided to withdraw their salary sacrifice scheme completely since the Autumn Statement
- New report from the Standard Life think tank urges Government to review their decision to introduce changes to salary sacrifice rules, as two thirds (65%) of employers surveyed currently offer salary or bonus sacrifice schemes
Two in five (39%) business leaders who currently offer salary or bonus sacrifice schemes say they are less likely to provide the scheme in future because of changes announced in the last Autumn Statement, according to new research1 from the Standard Life Centre for the Future of Retirement.
The new polling, conducted among 500 business leaders, suggests that the £2,000 annual cap on National Insurance relief for salary sacrifice schemes - set to be introduced in April 2029 - is likely to have a significant impact on employee pension saving, with one in ten (11%) employers whose organisations currently offer salary sacrifice saying they have already decided to withdraw the scheme completely.
The polling supports a new research report2 from the Standard Life Centre for the Future of Retirement, which explores employer attitudes to options for enhancing employee pension provision through in-depth interviews with employers and experts. The report recommends that the government review its decision to introduce changes to salary sacrifice arrangements, as it may harm efforts to boost employee saving above minimum levels. This comes as the National Insurance Contributions (Employer Pension Contributions) Act gains Royal Assent, after the House of Commons rejected a House of Lords amendment to raise the cap to £5,000 in the Bill, as well as rejecting a call for a further impact assessment to understand the scale of any behavioural change.
Catherine Foot, Director of the Standard Life Centre for the Future of Retirement, comments: “The UK has a widespread under-saving problem. Current minimum workplace pension auto-enrolment levels are insufficient, with 15 million people currently heading for financial insecurity in retirement3. The cap on salary sacrifice schemes will end up worsening this crisis by creating additional cost barriers that disincentivise employers from offering the scheme, with significant implications for their employees’ ability to save.
“With the National Insurance Contributions Bill receiving Royal Assent an opportunity has been missed to consider the effects of the changes on employer incentives to offer the scheme, as well as the extra costs for employees and employers. Our analysis4 finds that a lower earner is most likely to be affected not directly, but indirectly by the knock-on consequences that this has for businesses, while middle and high earners will have a double whammy – impacted by extra costs themselves, along with high payroll costs for the employer.
“Ideally, Government would have waited to hear the initial evidence from the Pensions Commission, which will soon set out the evidence on the scale and nature of under-saving before pressing ahead with this change.”
Effect of forthcoming changes on people saving at different earning levels4
| Gross salary | 8% sacrificed | Cap exempt | Excess subject to NIC | Extra employee cost | Extra employer cost |
|---|---|---|---|---|---|
| £35,000 | £2,800 | £2,000 | £800 | £64 | £120 |
| £50,000 | £4,000 | £2,000 | £2,000 | £160 | £300 |
| £75,000 | £6,000 | £2,000 | £4,000 | £80 | £600 |
Salary sacrifice remains most common way for employers to boost employee saving
The new report, Defying Inertia, highlights that salary sacrifice schemes, where employees give up a portion of their salary in exchange for a benefit from their employer, such as higher pension contributions, are the most common incentive used by employers to encourage contributions beyond the minimum auto-enrolment level. The additional polling found that nearly two thirds of (65%) employers say they currently offer either salary sacrifice or bonus sacrifice schemes, with a third (32%) offering both.
Leaders of small businesses (10-49 employees) were most likely to say that tax-free cap on salary sacrifice schemes would impact them, with half (49%) saying they would be less likely to offer the scheme in the future.
Gail Izat, Managing Director for Workplace and Retail Intermediary at Standard Life, comments: “Employers want to support their employees to save more and improve their financial prospects in retirement, as evidenced by the significant proportion who currently offer salary sacrifice schemes to their workforces. But businesses are struggling with difficult economic headwinds and increased costs across the board, meaning that further costs or administrative barriers are a huge disincentive to continuing to offer these. They also need further detail on implementing these changes as complex and unclear processes may further discourage them offering salary sacrifice.
“The changes will likely lead to many employees saving less over the next few decades than they would otherwise, with salary sacrifice currently one of the most straightforward and most effective ways for people to boost their pension.”
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Notes to editors:
1 - Research conducted for the Standard Life Centre for the Future of Retirement by Opinium Research among 500 private sector business leaders, excluding sole traders, between 12th-19th February 2026.
2 - Standard Life Centre for the Future of Retirement & Institute for Employment Studies, Defying Inertia: Employers’ role in boosting pension saving beyond the automatic enrolment default (February 2026).
3 - Department for Work and Pensions, Finishing the Job: Launching the Pensions Commission (August 2025.)
4 – Analysis by Standard Life plc (April 2026). For the £75,000 earner, employee NIC assumes excess sacrifice sits entirely above the Upper Earnings Limit (£50,270). Where sacrifice crosses the Upper Earnings Limit, a blended 8% / 2% rate will apply.
About the Standard Life Centre for the Future of Retirement
- Standard Life Centre for the Future of Retirement is a pioneering UK think tank with a bold ambition to help everyone achieve long-term financial security.
- How we work, save, and retire is changing, and it will look different for everyone. That traditional idea of spending decades in full-time employment and then retiring with a comfortable, guaranteed income is no longer going to be a reality for most people.
- Standard Life Centre for the Future of Retirement uses research to provoke fresh debate, drive action and influence change so that people can secure their financial future and enjoy a decent standard of living in their later lives.
- It is led by Catherine Foot, a leading research and policy specialist who was appointed as the Director of the think tank under its previous brand, Phoenix Insights, in June 2021.
- Catherine has over 20 years of experience in the field. From 2015 to 2021, she was Director of Evidence at the Centre for Ageing Better. She has also held senior roles with The King’s Fund and Cancer Research UK.
About Standard Life
- Standard Life is a retirement specialist focused entirely on retirement saving and income.
- We are proud to manage around c£317bn in assets on behalf of our 12 million customers, and we champion the belief that everyone's journey to and through retirement can be better.
- With our focus entirely on retirement savings and income we want to be the business that people trust to guide their retirement journey, helping our customers achieve better outcomes and greater financial security in later life.
- As a FTSE 100-listed group we are using our size, expertise and influence to shape the world our customers will retire into, and are committed to helping three million customers by 2035, take action towards a better retirement.
- Standard Life is a responsible investor with a clear commitment to supporting a more sustainable future. The company has achieved its net zero goal across its emissions for 2025 and is working towards net zero investment portfolios by 2050 or sooner.
- Standard Life is recognised as a leading employer, with long-standing accreditation as a Living Wage Employer, Living Pension Employer and Carer Positive Exemplary Employer and in 2025 became one of Britain’s Most Admired Companies in 2025.
