One of the biggest challenges HR teams face is getting employees to engage with their pensions. Too often, pensions are seen as just another deduction rather than a valuable benefit. But what if you could change that perception—helping employees save more for their future while keeping more of their earnings today?

That’s exactly what salary sacrifice pensions can do. By unlocking tax and National Insurance (NI) savings, this approach turns pension contributions into a financial win, making long-term saving feel like an immediate advantage.

Why HR’s role in pension engagement matters

Many employees put off thinking about their pension until it’s too late. The biggest barriers?

• A lack of understanding about how pensions work.
• The belief that retirement is too far away to worry about.
• Concerns that contributing more will reduce their take-home pay.

HR teams have a powerful opportunity to change this mindset—by positioning pensions not as a deduction, but as a smarter way to boost take-home value.

The link between pension engagement and financial wellbeing

Engaged employees aren’t just preparing for a comfortable retirement—they’re also improving their financial wellbeing today.

• Less financial stress leads to greater focus and productivity at work.
• More confidence in handling financial shocks.
• A reduced reliance on high-cost borrowing.

Salary sacrifice helps employees feel more in control of their finances by providing immediate tax benefits alongside long-term security.

How salary sacrifice pensions work

A salary sacrifice scheme lowers an employee’s taxable income, reducing the amount of NI and, in some cases, Income Tax they pay. This makes pension contributions more cost-effective - helping employees save more without feeling the pinch in their take-home pay.

Example:
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An employee earning £50,000 wants to contribute an extra £100 per month into their pension.
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Without salary sacrifice: Their take-home pay is reduced by around £80.
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With salary sacrifice: Their take-home pay only drops by around £68—putting an extra £12 in their pocket each month while saving the same amount into their pension.

Over a year, that’s an extra £144 in tax savings—without them contributing a penny less to their pension.

*Bonus: The employer also saves £180 per year on the employee contributions!

A game-changer for higher earners

Salary sacrifice isn’t just for basic-rate taxpayers. For those earning over key tax thresholds, it can be a crucial financial planning tool. Many people are stuck in ‘tax traps’ - often paying well over half of every extra £1 they earn! Two key workplace cohorts include:

• Parents earning £60,000 - £80,000: can help avoid the High Income Child Benefit Charge.
• High earners at £100,000+: can help retain more of the personal allowance, avoiding an effective tax rates of up to 60%.

By restructuring pension contributions through salary sacrifice, HR teams can help employees minimise tax, keep more of their earnings, and grow their pension faster.

How HR can drive pension awareness

HR professionals are at the heart of making salary sacrifice pensions successful. Here’s how you can lead the charge:

• Reframe the narrative – Communicate pensions as a way to increase take-home pay, not just a deduction.
• Use real-world examples – Show employees exactly how it affects their payslip.
• Make it personal – Offer one-to-one sessions or tools that calculate individual savings.
• Keep pensions top of mind – Regularly highlight the benefits, not just at enrolment.

HR: the unsung hero of financial wellbeing

By promoting salary sacrifice pensions, you’re not just managing a benefits package—you’re helping employees take control of their financial future. This isn’t just about retirement, it’s about making smarter financial choices today.

Want to transform how your employees see their pensions? 

Start the conversation now and help them save more—without sacrificing a penny of take-home pay.

*Employer National Insurance contribution rate of 15% effective from 6th April 2025 (2025/26 tax year)

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