Thousands of pension savers are already rethinking how much they put aside for retirement as major changes to salary sacrifice rules approach, new research suggests.
Around one in 10 savers expect to reduce their pension contributions once the reforms come into force in April 2029, a survey carried out by Yonder Consulting for Pensions UK found.
The research was conducted in December among more than 1,500 non-retired individuals.
It found that 28 per cent of respondents who are enrolled in salary sacrifice pension arrangements plan to increase their contributions before the changes take effect.
A further 43 per cent said they intend to keep their contribution levels the same.
Only three per cent said they plan to reduce their pension payments ahead of the April 2029 deadline.
The findings also point to significant uncertainty among savers about how they will respond to the policy shift announced in the Autumn Budget.
Under the Budget measures, pension contributions made through salary sacrifice above an annual threshold of £2,000 will lose their national insurance exemption from April 2029.
Any contributions above this limit will instead be treated in the same way as standard employee pension contributions for tax purposes.
This means they will attract national insurance charges.
HMRC guidance published online estimates that around 7.7 million workers currently use salary sacrifice to make pension contributions.
Around 7.7 million workers use salary sacrifice to make pension contributions
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Of those, around 3.3 million employees sacrifice more than £2,000 each year from their wages or bonuses.
Salary sacrifice schemes are typically offered by employers as a tax-efficient way for staff to boost their retirement savings.
Employees benefit by paying less national insurance while maintaining their take-home pay.
Industry bodies have raised concerns about the reforms, arguing that many people are already not saving enough for retirement.
They warn that further changes risk leaving workers with smaller pension pots later in life.
The Pensions UK research found that many savers remain unaware of the upcoming changes.
Matthew Blakstad, deputy director of strategic policy and research at Pensions UK, said: “Salary sacrifice works.
“It helps people save more for the retirement they want while maintaining take home pay.”
He said the reforms would have a direct impact on both earnings and long-term savings
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“The reforms will affect take home pay and pension pots, but many savers do not even know they are coming.”
He warned that confusion around the changes is widespread.
“The knowledge gap is stark.”
He said uncertainty risks undermining positive saving behaviours and confidence in the UK pension system.
“Rather than rewarding those who are doing the right thing, these reforms threaten to throw up new hurdles for people who are trying to secure their own futures.”
He also cautioned that employers may be less inclined to contribute above minimum levels once the reforms are in place.
Mr Blakstad said this could ultimately result in smaller retirement pots for workers.
The Government has defended the reforms.
A Treasury spokesperson said: “Salary sacrifice costs were set to treble to £8billion as high earners piled in huge bonuses without paying a penny in tax.
“Our fair reforms protect 95 per cent of workers earning under £30,000 who use salary sacrifice, while allowing everyone to save as much as they want with unchanged income tax and NICs relief on employer contributions.”
The Treasury said the changes are designed to protect most workers
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However, further warnings have been issued by the insurance industry.
Justin Wray, assistant director and head of long-term savings policy at the Association of British Insurers, said pensions should not be used as a short-term source of Government revenue.
He said restrictions on salary sacrifice were “counter-intuitive”, and pointed to Department for Work and Pensions analysis showing that millions of people are under-saving for retirement.
Mr Wray said the reforms risk creating “an even greater retirement crisis”.