Pension contributions come under strain from affordability concerns

Affordability pressures are forcing some employees to opt out of pension contributions, even as bosses encourage staff to take up ‘salary sacrifice schemes’ to boost benefits packages. According to a study from Broadstone, employers are increasingly looking to support workers with critical illness cover, and mental health services – but often stop short when it comes to supporting individuals suffering from gender dysphoria, despite its severe physical and psychological impacts.

First founded in 2023, Broadstone’s Employee Benefits Landscape report aims to uncover the decisions and priorities of employers in relation to their employee benefits and track any shifts over the past two years. Conducted in partnership with Investor in Customers, the latest edition charts a significant change to benefit policies, some of which are important to examine in the wake of new government policies around employer and employee taxation.

Chief among these is the government’s stance on ‘salary sacrifice schemes’. While you might assume a ‘benefit’ would be something offered to employees on top of their standard salary – which is what they need to keep a roof over their head, and food on the table in a high-inflation environment – a growing number of employees have been subsidising these offerings. In such a deal, an employee gives up part of their salary for employer support including everything from pensions contributions, to bus passes and mobile phone contracts.

Since the autumn 2024 budget, 43% of employers said they had introduced salary sacrifice schemes. One of the pluses of this sold to workers previously was that salary sacrifice schemes carried a higher tax threshold than direct payments – but as of the 2025 budget, the government has introduced a £2,000 cap for how much can be shielded from employer and employee NI contributions – beginning in 2029.

The measure is predicted to raise £4.7 billion in extra NI contributions in 2029, according to the Office for Budget Responsibility. However, it comes at a time when employee pension contributions are already coming under strain. Broadstone found that employer pension contributions ranged up to 25%, though most fall between 3% and 6%. While contribution levels are just one aspect of addressing pension adequacy, they remain a crucial factor in supporting long-term financial wellbeing.

With most schemes relying on a sturdy level of employee input to reach those long-term levels, 30% of employers set the minimum employee pension contribution at just 5%, consistent with 2023 findings and reflecting the continued use of the auto-enrolment minimum. However, Broadstone notes that the minimum level of contributions risk leaving employees short of a comfortable retirement income. Worse, around 15% of employers reported that at least 2% of their workforce reduced or opted out of pension contributions in the past year highlighting affordability pressures and low financial confidence.

Damon Hopkins, head of DC workplace savings at Broadstone, said, “The past two years have seen significant changes to the nation’s workplace pension provision with further reform on the way as the Government undertakes its Pensions Commission on adequacy. In the meantime, employers have had to juggle significant increases in National Insurance and economic volatility while the 2025 Autumn Budget delivered another hurdle in the form of future changes to pensions salary sacrifice arrangements. This Report examines how employers are approaching pension provision for their employees and the role they will play in the nation’s long-term saving moving forward.”

Health benefits

As the UK’s public health service continues to struggle with the consequences of decades of underfunding, short staffing, and huge demographic shifts, employers have also had to take healthcare access into account for their staff. An 11% portion of employers have definite plans to introduce private medical insurance benefits within three years, up from 9% in 2023 with the proportion of those considering it increasing from 15% to 20%.

With financial pressures weighing heavily on many employees, one part of that sees 63% of organisations provide mental health or resilience training and 77% provide access to an employee assistance programme. And while only 14% of employers currently offer company-funded critical illness cover, 20% are either definitely introducing it, or considering it.

Brett Hill, head of health and protection at Broadstone, added, “Our first Report was delivered at a time when the nation was emerging from the aftermath of the global pandemic. Fast forward two years and the UK is still grappling with the some of those consequences, in the form of significant and sustained pressures on its public healthcare system. In this Report, we assess how businesses are increasingly taking these factors into account when reviewing their health, wellbeing and protection benefits to tackle these issues and ensure productivity remains high in the workforce.”

Also among these services were a number of specific forms of support. A 39% portion of employers now offer some form of support for workers going through the menopause, with 19% signposting to an external service provider, and 20% supplying a direct company-funded option. Similarly, 25% offer some help for neurodivergent staff, and 20% are willing to externally or directly help with fertility treatment. But despite the physical and mental impacts of the condition, only 14% recognised gender dysphoria as something they should support staff with.

According to previous research from Stonewall, 48% of trans people in the UK have attempted suicide at least once in their lives. Meanwhile, 84% of trans people have considered suicide, with many reporting repeated thoughts of self-harm. However, only 3% of employers told Broadstone that they offered employees with gender dysphoria company-funded support, while a further 11% were willing to signpost to external service providers.

This comes at a time when businesses are still mulling over how to respond to the UK Supreme Court’s decision that the protected characteristic of “sex”, under the terms of the 2010 Equality Act, referred to “biological” women, and not transgender women. As a result, businesses and public spaces were presented the option of excluding transgender individuals from spaces from spaces reserved for women, if they were not assigned that gender at birth.