Responding to speculation of changes to salary sacrifice as part of the Autumn 2025 Budget, Raj Jethwa, UCEA Chief Executive said:
“UCEA and our members are understandably concerned by speculation about changes to salary sacrifice arrangements in the Autumn Budget*. We have written to the Treasury urging it to carefully consider the financial impact of these increased costs to the Higher Education (HE) sector, given that many HE Institutions (HEIs) are anchor employers in their local communities.
“The HE sector is already under significant financial strain after a massive decline in the value of the undergraduate tuition fees – the small £285 increase in English fees for the 2025-26 academic year has been all but wiped out by increases in employer National Insurance Contributions (NICs)** – whilst fees for ‘home’ students in Northern Ireland, Scotland and Wales have also declined massively in value. The recent declines in overseas students have compounded the sector’s financial problems, while the proposal to introduce a levy on international students is estimated to cost English HEIs £620m collectively.
“Across the HE sector, salary sacrifice for pension contributions is widely utilised by institutions and their staff. If this is capped at £2,000 it will add significant additional costs to HEIs through higher NI payments. The changes will also impact employees that make additional pension contributions by salary sacrifice.
“Our initial high-level estimate is that this will cost individual institutions an additional £1m to £3m a year, while increasing costs to the HE sector by over £50m. These figures do not take into account the significant numbers of staff who will salary sacrifice in order to make Additional Voluntary Contributions.
“These numbers are also understated because we have only calculated figures in respect of one pension scheme (USS). There are a range of other pension arrangements across HE into which members can salary sacrifice their contributions.
“Across the HE sector, where ‘post-92’ universities are already reeling from increases to employer contributions to the Teachers’ Pension Scheme from 16.48% to 28.68% which cost an extra £125million a year ***, the suggestion that there will also be a cut to other salary sacrifice benefits is also worrying.”
Notes
* Rachel Reeves plots stealth tax raid on retirement savings for budget - https://www.thetimes.com/uk/politics/article/stealth-tax-budget-rachel-reeves-q3gmmcbqf
** UCEA estimates that the increase from April 2025 in employer ‘secondary Class 1 NI Contributions (NICs)’ from 13.8 per cent to 15 per cent and the point at which employers are liable to pay NICs on employees’ earnings reduced from £9,100 to £5,000 a year has increased English universities’ NICs bill by approximately £372m in 2025–26.
*** https://www.ucea.ac.uk/news-releases/20oct2025/ and https://www.ucea.ac.uk/library/infographics/benefits/#
ENDS
For further information from UCEA, please contact Andy Fryer, Head of Communications and Membership (a.fryer@ucea.ac.uk), Marc Whittaker, Public Affairs and Events Manager (m.whittaker@ucea.ac.uk), Armelle Griffin (a.griffin@ucea.ac.uk), or Ashleigh Rigden (a.rigden@ucea.ac.uk), Communications Officers.
“UCEA and our members are understandably concerned by speculation about changes to salary sacrifice arrangements in the Autumn Budget*. We have written to the Treasury urging it to carefully consider the financial impact of these increased costs to the Higher Education (HE) sector, given that many HE Institutions (HEIs) are anchor employers in their local communities.
“The HE sector is already under significant financial strain after a massive decline in the value of the undergraduate tuition fees – the small £285 increase in English fees for the 2025-26 academic year has been all but wiped out by increases in employer National Insurance Contributions (NICs)** – whilst fees for ‘home’ students in Northern Ireland, Scotland and Wales have also declined massively in value. The recent declines in overseas students have compounded the sector’s financial problems, while the proposal to introduce a levy on international students is estimated to cost English HEIs £620m collectively.
“Across the HE sector, salary sacrifice for pension contributions is widely utilised by institutions and their staff. If this is capped at £2,000 it will add significant additional costs to HEIs through higher NI payments. The changes will also impact employees that make additional pension contributions by salary sacrifice.
“Our initial high-level estimate is that this will cost individual institutions an additional £1m to £3m a year, while increasing costs to the HE sector by over £50m. These figures do not take into account the significant numbers of staff who will salary sacrifice in order to make Additional Voluntary Contributions.
“These numbers are also understated because we have only calculated figures in respect of one pension scheme (USS). There are a range of other pension arrangements across HE into which members can salary sacrifice their contributions.
“Across the HE sector, where ‘post-92’ universities are already reeling from increases to employer contributions to the Teachers’ Pension Scheme from 16.48% to 28.68% which cost an extra £125million a year ***, the suggestion that there will also be a cut to other salary sacrifice benefits is also worrying.”
Notes
* Rachel Reeves plots stealth tax raid on retirement savings for budget - https://www.thetimes.com/uk/politics/article/stealth-tax-budget-rachel-reeves-q3gmmcbqf
** UCEA estimates that the increase from April 2025 in employer ‘secondary Class 1 NI Contributions (NICs)’ from 13.8 per cent to 15 per cent and the point at which employers are liable to pay NICs on employees’ earnings reduced from £9,100 to £5,000 a year has increased English universities’ NICs bill by approximately £372m in 2025–26.
*** https://www.ucea.ac.uk/news-releases/20oct2025/ and https://www.ucea.ac.uk/library/infographics/benefits/#
ENDS
For further information from UCEA, please contact Andy Fryer, Head of Communications and Membership (a.fryer@ucea.ac.uk), Marc Whittaker, Public Affairs and Events Manager (m.whittaker@ucea.ac.uk), Armelle Griffin (a.griffin@ucea.ac.uk), or Ashleigh Rigden (a.rigden@ucea.ac.uk), Communications Officers.
