UK employees could be missing out on higher monthly pay by overlooking how their workplace pension is structured, according to digital pension provider Penfold↗︎.
The firm is urging workers to check whether their employer uses salary sacrifice, a system where employees give up part of their gross salary and receive an equivalent pension contribution from their employer. Because contributions are taken before National Insurance is calculated, the structure can reduce NI deductions for eligible staff.
At present, employees pay 8% National Insurance on earnings between £12,570 and £50,270, while the continued freeze on the personal allowance threshold is pushing more people into higher tax bands as wages rise. Penfold argues this makes pension structure more relevant for day-to-day income.
Chris Eastwood, chief executive at Penfold, described salary sacrifice as a largely overlooked payroll feature that can change how much workers actually take home each month. He said many employees still assume a pay rise or promotion is the only route to higher income, when adjustments to pension contributions may already achieve part of that outcome.
Under salary sacrifice, savings come from the way contributions are processed rather than from increased employer funding alone. Some workers may see a higher net salary, while others may choose to redirect the National Insurance savings into their pension pot instead.
Employers also stand to benefit. With employer National Insurance set at 15%, businesses can reduce their own liability through salary sacrifice arrangements. Some choose to pass those savings back into staff pensions, increasing long-term retirement contributions without altering gross pay.
Eastwood said awareness remains the main barrier. He noted that many schemes operate quietly within payroll systems, meaning employees may not realise the option exists or understand how it affects their pay structure.
The wider pensions system is also set for change. The rollout of pensions dashboards ahead of the October 2026 connection deadline is expected to give savers clearer visibility of all their pension pots in one place, potentially making it easier to assess how contributions are being made.
Penfold said the combination of tax thresholds, National Insurance rules and pension visibility makes this a timely moment for workers to review their arrangements.
