Lucian Camp is a financial services brand consultant, copywriter, author and blogger. He co-presents the On The Other Hand podcast.
A couple of days ago, those word nerds at the Oxford University Press shared their Word of the Year with us. This year’s winner was “rage bait”, and I should add that the announcement included a somewhat tortuous explanation as to why, contrary to appearances, this isn’t actually two words and so does qualify as Word of the Year.
In financial services, though, I may not be sure what we’d choose as our Word of the Year but there’s no doubt about our Word of the Fourth Quarter. This is definitely Salary Sacrifice. Changes to the rules on using this technique to make pension contributions were, in the event, one of the few interesting things (well, fairly interesting things) in Rachel Reeves’s Budget, so they attracted a great deal of attention in all those reams and reams of post-Budget blogs, podcasts, articles, posts, newsletters and webinars.
And with Salary Sacrifice becoming such a big deal all of a sudden, I feel I should make an admission. Before now, through all my long and arduous career at the financial marketing coalface, I hadn’t ever actually heard of it (or, if I had, I hadn’t remembered it). So, when it hit the headlines last Wednesday, I thought I really ought to find out what the hell it is.
The first obstacle was caused by our customary enthusiasm for using unhelpful words. As pensions jargon goes, “Salary Sacrifice” isn’t in the same class as “Uncrystallised Funds Pension Lump Sum,” but it’s not the easiest. And my dictionary didn’t help much by defining “sacrifice” as “an act of slaughtering an animal or person as an offering to a deity”, which got things off to a brow-furrowing start.
But even when I’d got past that, I still found myself in dense fog when it came to understanding what it actually means – and specifically, the difference between contributing to a pension by salary sacrifice, and just, well, contributing to a pension. I really think I still haven’t got this. Either way, your contributions are free from tax and National Insurance, so why choose one rather than the other?
But if I’m mystified a little, there are many others who are mystified a lot. Three or four friends and relatives, including my super-bright and financially literate son Ollie, got in touch within hours of Rachel Reeves announcing her new rules, anxiously asking if it’s really right that in the future you can only pay £2,000 a year into a pension.
Of course that’s not what she said at all. What she actually said is that from 2029, you’ll have to pay National Insurance on pension contributions of over £2,000 a year made by Salary Sacrifice. And of course as soon as I told Ollie this, he said well, why not just make regular pension contributions not by Salary Sacrifice then, and I had to admit that I didn’t know and couldn’t explain. Ask ChatGPT, I told him. Thanks dad. That financial expertise of yours is such a big help.
It was no big deal, this little episode, but just another reminder of the enormous difficulty of explaining pretty much anything in financial services in a way that anyone will actually understand. In the last week, there’ve been thousands of references to this Salary Sacrifice thing – it crops up in 99% of those post-Budget blogs, podcasts, articles, posts, newsletters and webinars, a couple of them even written by yours truly.
But who really understands what they mean, or what it is, or what should be done about it? Depressingly few of us, I’d say. Indeed, if I’m anything to go by, not even the bloke writing the stuff.
