Now the date for the Autumn Statement has been announced (26 November 2025) the rumour mill is well and truly turning, with one area potentially under threat is pension salary sacrifice.
What is salary sacrifice?
A salary sacrifice arrangement is an agreement to reduce an employee’s entitlement to cash pay, usually in return for a non-cash benefit; in this case, the amount of employee’s pension contributions.
The focus of any challenge
Earlier this year (27 May 2025) HMRC published a research paper titled ‘Understanding the attitudes and behaviours of employers towards salary sacrifice for pensions’ (‘arrangement’). The research paper has provided the Chancellor with several options to consider ahead of the Autumn Statement, which we consider below.
The first option the Chancellor could consider is the removal of the National Insurance (NI) ‘exemption’ for both employers and employees. This will result in the amount of NI being charged on the salary sacrificed.
A second option which may be considered is the removal of the NI ‘exemption’ for both employers and employees as well as pension tax relief for the employee.
The third option, which the HMRC research paper considered was removing the NI exemption on salary sacrificed above £2,000 per annum. More recently, some commentators have suggested a variation on this theme, the use of a NI exemption of up to £5,000 but covering a wider range of salary sacrifice arrangements, not just pensions.
Observations
Tampering with pensions savings will be a highly controversial move, even for this government. However, employers will be concerned about the impact and limitations on pension saving will have on staff morale. The lack of any incentive may see employees dis-engage from saving towards their retirement.
What does this mean for employers?
Clearly with 26 November 2025 not far off employers have limited options open to them.
If employers do not currently offer a pensions salary sacrifice arrangement, they may want to consider putting a scheme in place ahead of 26 November 2025 with the hope that some form of transitional provisions will be applied. However, the reality of securing full stakeholder engagement in a very short period is going to prove highly challenging.
More realistically for employers who currently make use of a pensions salary sacrifice scheme, they may want to review their existing arrangements to ensure they are making best use of what is already in place.
Stay ahead of the changes
Changes are expected, and we will continue to monitor these developments, considering how they may affect you and your organisation. As part of HaysMac’s comprehensive Autumn Statement commentary, we will be hosting a webinar on 27 November, the day after the budget, when we will have more clarity on the situation. The webinar will look at a suite of changes across the tax regime, as set out by Rachel Reeves, including the likely changes to salary sacrifice.
Register for the webinar here, and be sure to follow HaysMac on LinkedIn to make sure you don’t miss any of our upcoming commentary.
In the meantime, contact Nick Bustin to speak about how you can prepare for the upcoming changes.
