Nearly half (46 per cent) of UK pension savers using salary sacrifice believe they will end up with smaller pension pots as a result of planned changes due to take effect in April 2029, research from Pensions UK has revealed.

The survey suggested that while millions of savers currently benefitted from salary sacrifice arrangements, awareness and understanding of the forthcoming reforms remained limited, raising concerns that individuals could lose out without realising it.

Around two in five defined contribution (DC) pension savers said they used salary sacrifice, with 28 per cent doing so specifically for pension contributions.

Usage was notably higher among men, at 32 per cent compared with 23 per cent of women, and was more prevalent among higher earners, with 37 per cent of those earning more than £48,000 using salary sacrifice, compared with 16 per cent of those earning less than £14,000.

However, fewer than half of respondents (41 per cent) said they were aware of any salary sacrifice changes announced in the Budget.

Awareness was higher among those already using salary sacrifice, at 63 per cent, although a significant gender gap remained, with 70 per cent of male users aware of the changes compared with 51 per cent of female users.

Among savers currently using salary sacrifice for pension contributions, nearly two-thirds (62 per cent) expected to pay more national insurance as a result of the reforms, while half anticipated paying more tax.

Meanwhile, more than half (51 per cent) believed employers would also face higher national insurance costs, and 46 per cent thought less money would ultimately go into their pension savings.

The research also highlighted mixed behavioural responses ahead of the 2029 changes.

While 43 per cent of savers said they did not expect to change their contribution levels, more than a quarter (28 per cent) said they were likely to increase contributions before the reforms take effect.

Only 3 per cent said they planned to reduce contributions before 2029, although 11 per cent expected to reduce them once the changes are implemented, and 14 per cent were unsure.

Commenting on the findings, Pensions UK deputy director of strategic policy and research, Matthew Blakstad, warned that the reforms risk undermining positive saving behaviours.

“This research should be a wake-up call for the government,” he said.

“Salary sacrifice works. It helps people save more for the retirement they want while maintaining take-home pay.

"Instead of dismantling a system that supports savers and employers, the government should consider the knock-on impact these changes will have," he stressed.

Blackstad also warned of a "stark" knowledge gap.

"Confusion about the changes is widespread and risks undermining confidence in the UK pension system," he said.

"Employees are also acutely aware of the impact these changes will have on their employers, and when the reforms come in, employers will have fewer incentives to increase contributions above the minimum, which can only mean smaller pension pots at retirement.”

Blakstad added that, with pensions already seen as complex, savers need greater stability and clarity from policymakers to maintain trust and support long-term saving.

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