The Society of Pension Professionals (SPP) has written to all 650 Members of Parliament warning of the dangers in reducing or removing salary sacrifice arrangements for pension contributions.
In a short paper titled, “A sacrifice too far?” the SPP explains that research into salary sacrifice, commissioned and published by HMRC earlier this year, has led to some speculation that the government may seek to make savings by abolishing or reforming salary sacrifice for pension contributions.
In the run-up to the Budget on 26 November 2025, such speculation has inevitably increased.
The SPP have therefore sought to explain what salary sacrifice for pensions is, why it matters, how it is used and by whom, and what the implications would be if government were to impose restrictions or abolish this longstanding arrangement.
Around a third of private sector employees make use of salary sacrifice arrangements, and almost 10% of public sector workers do so too. So, any changes will bring upheaval to a large number of workers with removal of the arrangement costing millions of employees hundreds of pounds a year.
The SPP explain that whilst there is a £4bn cost to the government in providing salary sacrifice arrangements (£1.2bn for employees and £2.9bn for employers), there is also “widespread recognition that this is a positive investment that incentivises pension saving”.
The research commissioned and published by HMRC demonstrated that employers are generally very supportive of the arrangement and believe that any changes would cause confusion, reduce benefits to employees, and disincentivise pension savings. The research put forward three potential scenarios for restricting salary sacrifice with employers flagging that in all 3 scenarios, employee morale was likely to be badly affected.
Steve Hitchiner, Chair of SPP’s Tax Group, said:
“Changing salary sacrifice arrangements would lead to a reduction in take home pay for millions of employees who are saving into a workplace pension, with the greatest impact for those earning less than £50,284 a year.
It would also represent another sizeable cost to employers, despite the Chancellor’s public commitment against this, and would undermine the critical role that employers play in supporting and promoting good quality pension saving vehicles.”
