What's Pension Salary Sacrifice? Let's Break It Down! 🎯
Imagine getting more money in your take-home pay while keeping you salary and pension contributions the same - sounds too good to be true, right? Well, that's exactly what pension salary sacrifice can do! Let's explain how in simple terms.
The "Before and After" Story 📖
Right now, you pay national insurance on any pension contributions you make. This reduces your take-home pay.
After you move to a salary sacrifice pension deduction, you'll no longer pay any national insurance on your pension, resulting in more in your take-home pay!🎉
Let's Look at Real Numbers 💰
Take a look at our example of your take-home pay if you're on a £40,000 salary with a 5% pension contribution. Click on the dropdown to see a breakdown of your pay and how your contributions reflect in your pension pot!
Relief at source pension: Take-home pay £2,560.10
Relief at source pension: Take-home pay £2,560.10
Monthly pay: £3,333.33
Tax : £457.07
National insurance: £182.83
Pension contribution: £133.33
Take home pay: £2,560.10
Total paid into your pension pot: £266.66
£133.33 From your take-home pay (80% of your full contribution)
£ 33.33 Tax refund (20% of your full contribution)
£100.00 3% Employer's contribution
£266.66 Total into your pension pot
Net pay arrangement pension: Take-home pay £2,560.10
Net pay arrangement pension: Take-home pay £2,560.10
Monthly pay: £3,333.33
Tax : £423.74
National insurance: £182.83
Pension contribution: £166.66
Take home pay: £2,560.10
Total paid into your pension pot: £266.66
£166.66 From your take-home pay (100% of your full contribution)
£100.00 3% Employer's contribution
£266.66 Total into your pension pot
Salary sacrifice pension: Take home pay £2,573.44
Salary sacrifice pension: Take home pay £2,573.44
Monthly pay: £3,333.33
Tax : £423.74
National insurance: £169.49 ⬅️Lower than all the other schemes!🎉
Pension contribution: £166.66
Take home pay: £2,573.44
Total paid into your pension pot: £266.66
£166.67 Your employer will pay this in for you (100% of your full contribution)
£100.00 3% Employer's contribution
£266.66 Total into your pension pot
That's an extra £13.34 every month - or about £160 per year - without doing anything different!
The Best Parts 🌟
The amount paid into your pension pot stays exactly the same
You don't need to change anything about your pension
You get more take-home pay
It's all handled for you
What You Need to Know 🤔
Your pension provider remains the same (no change)
You're still saving the same amount for retirement (unless you ask to add more)
It's just a smarter way to pay into your pension (you save money!)
Is It Right For You? ✅
Salary sacrifice is great if you:
Want to save money efficiently for your retirement
Like the idea of more take-home pay
Are currently on a relief at source pension and are a higher rate taxpayer
Want to bring your pay into a lower tax bracket
Want to reduce your salary to become eligible for income-related support
Please read through our FAQ section where you can find even more information on the topics mentioned above.