A planned £2,000 Treasury cap on annual salary sacrifice contributions will cut pension investing, according to industry pensions body Pensions UK. 

Pensions UK says a major new survey it has carried out since the changes were announced suggests that 46% of salary sacrifice users expect to save less in pensions as a result of the planned salary sacrifice changes.

Nearly three in 10 (28%) DC pension savers say they are using salary sacrifice to boost their pension with 62% of salary sacrifice savers believing the changes will result in them paying more national insurance. 

Chancellor Rachel Reeves announced in her recent Budget that from April 2029 salary sacrifice would be limited to £2,000 per per person per annum.

Pensions UK warns that while salary sacrifice is widely used for pension contributions, awareness of the planned changes is, “low and confusion could be widespread.”

Two in five people paying into a DC pensions say they use salary sacrifice, with most using it for pension contributions, at 28%. Usage is higher among men (32%) than women (23%), and higher among those earning more than £48,000 (37%) compared with 16% among those earning less than £14,000. 

Fewer than half of respondents (41%) were aware of any salary sacrifice changes in the Budget, however this rises among salary sacrifice users to 63%. Among users, men are more likely to be aware (70%) than women (51%), according to Pensions UK.

When asked about the likely impacts of the reforms, among those currently using salary sacrifice for pension contributions, 62% expect to pay more National Insurance, 50% expect to pay more tax, 51% believe employers will pay more National Insurance and 46% believe less money will go into their pension. 

Despite the cap challenges two in five say they do not expect to change contributions (43%), while 28% say they are likely to increase contributions before the change comes into effect. 

Few plan to reduce before the change (3%), while 11% expect to reduce when the change takes effect and 14% are uncertain.

More than two in five (43%) say they will use other savings vehicles, with stocks and shares ISAs at 58%, cash savings such as savings accounts, fixed term bonds, and premium bonds at 47%, and cash ISAs at 46%, alongside paying off mortgages or debts earlier at 25% and using a Lifetime ISA at 23%. 

Matthew Blakstad, deputy director of strategic policy and research at Pensions UK, said: "This research should be a wakeup call for Government. 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, government should consider the knock-on impact these changes will have. The reforms will affect take home pay and pension pots, but many savers do not even know they are coming.”

Pensions UK describes itself as the voice of pension schemes that together provide a retirement income to more than 30 million savers in the UK and invest more than £2 trillion in the UK and abroad.

• The research was conducted on behalf of Pensions UK by Yonder Consulting among 1,588 not retired adults between 19-21 December 2025.