smartpension salary sacrifice Instructions
- June 4, 2024
- smartpension
Table of Contents
Instructions Manual
salary sacrifice
Why choose salary sacrifice?
This guide is for employers only
November 2021
What is salary sacrifice?
Salary sacrifice, also known as `salary exchange, is an arrangement between
you and your employees where you agree to reduce your employee’s salary by the
amount you want to contribute to their pension. You will then pay this amount,
plus your contribution, to their pension savings.
Why should I choose salary sacrifice?
| It is a tax-efficient way for you to save money on your workplace pension
scheme
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| Both you and your employees pay less National Insurance contributions
| You can choose how to reinvest those savings
| Allows you to offer increased benefits for your employees, at no extra cost
to you
How does it work?
If you offer salary sacrifice, this is how it works:
- you will reduce the employee’s salary by the pension contribution they wish to pay
- the National Insurance contributions paid each month will be calculated on the employee’s reduced salary figure
- the total regular amount paid into their pension plan will not reduce and may increase at no extra cost, depending on the basis of the arrangement
- the amount exchanged will be added to your existing employer contribution and result in a new total employee-only contribution being paid into the member’s pension
Some things to consider
- increased level of administration and HR work required to set up salary sacrifice
- your payroll provider will need to display salary sacrifice correctly
- your employees’ pre-tax salaries will reduce by agreeing to salary sacrifice which may impact their entitlement to statutory or salary benefits
Interested in finding out more?
Get in touch by calling us on 0333 666 2323 or speak to your dedicated
Smart Pension contact.
You can also contact our employer support team by completing this online form.
Smart Pension Limited
The Smart Building, 136 George Street, London, W1H 5LD
smartpension.co.uk
Telephone: 0333 666 2323
Company registration number: 9026697
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