A recent study by Charles Stanley Direct reveals that nearly a third (30%) of DIY investors are considering salary sacrifice to help increase their savings and mitigate the impact of National Insurance Contributions (NIC) hikes. This follows the Autumn Budget’s announcement that employers will be required to raise NIC from 13.8% to 15% starting in April 2025.
Currently, 29% of individuals are already participating in salary sacrifice schemes through their employers. However, 15% of respondents say their employers do not offer this option. Of those who already use or plan to use salary sacrifice, over half (51%) intend to boost their pension contributions for retirement.
Among those considering salary sacrifice, 20% report that their employer currently offers the option but they are not using it yet, while 10% would use salary sacrifice if their employer introduced the scheme.
A salary sacrifice arrangement is an agreement to reduce an employee’s entitlement to cash pay, usually in return for a non-cash benefit, such as company cars, pension contributions, or medical insurance. Rachel Reeves’ Budget increased employers’ National Insurance contributions (NIC), which for many employers is set to make the cost of employment more expensive, potentially leading to pay freezes, hiring cuts, or job losses. With concerns over how this will have a knock-on impact on employees, there is much talk about whether salary sacrifice will help in boosting employees’ pension savings.
The survey revealed that 60% of DIY investors say their employer already offers salary sacrifice, while 15% say their employer does not. Of this, 29% say they currently use salary sacrifice schemes from their employer.
Looking at those who currently use or plan to use salary sacrifice (59%), half (51%) say they use it, or will use it, to boost their pension pot for retirement. A third (33%) say they use it or will use it to pay less national insurance. 29% say they use salary sacrifice to put them into a lower income tax bracket. A quarter (25%) say they currently or will use it because their employer encourages them to, while 21% use it to be able to afford a car or bike.
Lisa Caplan, Financial Planner at Charles Stanley, comments: “Following the Chancellor’s decision to raise employer contributions to National Insurance, the attraction of salary sacrifice has grown markedly. It gives employees the chance to bolster their pension savings while reducing tax liabilities, which employers also benefit from. With 15% of those surveyed saying their employers don’t offer salary sacrifice, there’s a chance that many businesses may be missing a trick.
“With DIY investors known for making their own financial decisions in their personal interests, it’s telling that so many use or plan to use salary sacrifice. While it may be a good option for many, it’s important to note that taking salary sacrifice is a decision to be made following close consideration of personal circumstances.”
