As noted in the recent Workforce Survey 2026, the planned changes to pension salary sacrifice, including the capping of National Insurance savings from April 2029, are already prompting employers to review reward models.

Understanding the 2029 National Insurance cap

From April 2029 onwards, only the first £2,000 of an employee’s salary sacrifice pension contributions will be exempt from National Insurance Contributions (NICs) in each tax year. Should any salary over this £2,000 threshold be sacrificed, this would then be subject to Class 1 primary and secondary NICs.

Income tax savings are unaffected – contributions above the £2,000 threshold will still be exempt from income tax.

For businesses that run a pension salary sacrifice scheme and make generous contributions, these changes are likely to have significant financial implications.

Although it is worth noting that as both primary and secondary NICs will be due, there will be financial implications for employees as well as businesses.

What have other businesses done so far?

Our survey shows that the vast majority of businesses have already considered the financial impact that these changes will have, with only 7% not yet having given this any thought.

Of those who have already considered the impact, businesses plan to respond as follows:

• 54% are considering offering a more flexible benefit package.
• 44% are considering reallocating budget from other areas of the business to cover the additional costs.
• 38% are considering revising the level of employer pension contributions.
• 24% are considering reducing future pay increases.

Although many businesses that operate a pension salary sacrifice scheme have already given this some consideration, there are also a small number (4%) of businesses who do not yet operate such a scheme.

What might businesses need to do next?

If your business doesn’t currently operate a pension salary sacrifice scheme, it’s still worth implementing one. The NIC relief available will be capped from April 2029, but there are several years left to make the most of the current NIC relief.

Even where a scheme exists, it is often the case that the schemes do not have full employee uptake. Encouraging broader participation could unlock additional NIC relief before the cap takes effect.

Where a scheme is in place, the most important next step is to model the full financial impact of these changes. Only once you understand the numbers, can you make informed decisions about how to respond.

There are several options businesses may consider as April 2029 approaches, including those highlighted by our survey, but it’s important to weigh the full implications of each before acting. For example, if reducing employer pension contributions is on the table, the legal implications of that change should be explored thoroughly before being actioned.

Only by working through all the options, and their risks and benefits, can businesses be confident that any changes they make will hold up in both the short and long term.

For more information, please get in touch with Andrew Timpson or your usual RSM contact.

Latest related insights