ICAS: Reports of employers withdrawing salary sacrifice schemes are unsurprising

MEDIA STATEMENT - Following news that some employers are scrapping salary sacrifice schemes in light of the Chancellor’s cap on national insurance relief, ICAS says that measures that disincentivise pension saving represent short sighted tax policy and that pensions policy needs to be coherent, stable and long term so that employers, pension savers and the pensions industry can plan with confidence.

Katie Close, Director of Tax at ICAS, said: “Reports of employers withdrawing salary sacrifice schemes are unsurprising. The changes to salary sacrifice announced in the 2025 Budget will have long‑lasting impacts for both individuals and businesses. At a time when private pension saving is already insufficient and the population is ageing, measures that disincentivise pension saving represent short‑sighted tax policy - particularly in the absence of wider reform to encourage long‑term retirement saving.

“Research by the IFS and the Pensions Commission shows that more than a fifth of private sector workers don’t save into a workplace pension at all. Of those who do, around 30-40% are not on track to achieve an adequate retirement income. These changes risk exacerbating this problem if employers respond by withdrawing salary sacrifice schemes or reducing the generosity of pension provision for all workers.

“Pensions policy needs to be coherent, stable and long‑term so that employers, pension savers and the pensions industry can plan with confidence. The ultimate objective must be to ensure people have adequate income in retirement. Without that clarity and certainty, reforms risk undermining the very outcomes they are meant to support, while potentially widening existing inequalities such as the gender pensions gap.”