The change to pension salary sacrifice is due to come into effect from 6 April 2029 and will see a new £2,000 limit on the amount of contributions employees can make into a salary sacrifice scheme free of tax and national insurance contributions (NICs), hitting schemes run by 290,000 UK employers.

This will reduce the bill for tax relief on salary sacrifice pensions by £4.7bn a year, a substantial saving for the Treasury.

An estimated 7.7 million employees currently use salary sacrifice to make pension contributions. Of these, 3.3m sacrifice more than £2,000 of salary or bonuses. This means 44% of employees using salary sacrifice for pensions will be hit by the clampdown.

However, just over half (56%) of employees will fall below the threshold based on current HMRC estimates, meaning 4.3 million pension savers will not be affected, at least initially. How long this situation lasts with the impact of inflation and successive governments’ tendencies to freeze thresholds is yet another concern in the longer term.