THE SALARY SACRIFICE SECRET

If you care about building wealth, you should care about how your pension contributions are made.

Salary sacrifice for pension contributions can uplift your pension contributions by up to 13.8%, That could turn £10,000 a year contributed into £11,380 if your company offers this.

In my opinion, all companies that care about their employees deeply should offer salary sacrifice for pension contributions AND pass on 100% of their national insurance saving to your pension. If they don’t, it’s time to start shouting about it!

Why is salary sacrifice so good?

Using salary sacrifice for pension contributions saves national insurance for the employee and employer. WIN, WIN.

The alternative methods of pension contribution attract national insurance. Giving HMRC the money that could be in your pension.

Many employers choose to pass on their whole national insurance saving (13.8%) to their employees’ pension pot. They’re simply diverting their cost from HMRC to you – perfect! Some employers may offer contributing a part of their saving – okay. Some won’t pass on any of their saving – insert choice words.

The only requirement from your employer, is to provide a company pension scheme that offers salary sacrifice.

What you need to know about salary sacrifice

As with all things financial planning, not everything is straightforward.

Salary sacrifice can reduce other employer benefits (death in service, income protection, etc.) if not managed correctly. You could also be able to borrow less for your mortgage. For most though, the benefits outweigh the negatives. It’s always worth getting financial advice if you’re unsure on your position.

What can you do now?

If you’re an employee, and your employer does not offer salary sacrifice with the national insurance saving passed on, share this blog with your HR/People department, or let me do it for you!

If you’re an employer, move to a pension scheme that offers salary sacrifice and give your employees the money they deserve. I’m happy to work with you to implement a pension scheme deserving of a great team. Contact me directly gregory@muvado.co.uk.

This article was written by Gregory Deer at Muvado Money Limited, an appointed representative of Sense Network Limited, based on his understanding of current legislation. Dated 26th April 2023.