Marvin OnumonuTwo-thirds of UK workers are using salary sacrifice but most do not know about the planned cap coming in 2029, research from Barnett Waddingham found.
Around 62% of workers said they used salary sacrifice, but 63% were unaware it will be capped, which will limit how much can be paid through salary sacrifice without National Insurance deductions.
One in five workers thought it could only be used for pension contributions, when it can also be used for things like childcare support and company car schemes.
There was also confusion about how it affects take-home pay and mortgage borrowing, and some workers thought it could take cash earnings below the National Minimum Wage.
Mark Futcher, head of DC pensions at Barnett Waddingham, part of Howden, 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.”
Futcher added: “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.”
