Employee’s FAQs
Student Loans
Bonus and salsac
Can I sacrifice my bonus
Will my pension amount change?
How do I save money?
NPA vs salsac
State Pension
Universal & Tax Credits
Child Benefit
SMP
Statutory pay & Mortgages
Higher Rate Taxpayers
NMW
Dont want to change
Real Living Wage and NMW
Sick leave
Unpaid leave
Above State Pension Age
How is Student loan impacted?
A salary sacrifice will reduce the amount of student/postgraduate loan repayments as the calculations are based on the taxable gross pay, so the reduced salary after the salary sacrifice deduction.
What is the impact of Pension Salary Sacrifice on bonuses?
If your bonus is calculated from your salary, this will not change once you move to a salary sacrifice pension deduction.
You may decide you want to sacrifice some or all of your bonus into your pension, saving you both tax and national insurance. This will require a written agreement between you and your employer which must be in place before the bonus is provided to you. Speak with your manager to request this.
Can I sacrifice my bonus/commission?
You can request to sacrifice some or all of your bonus or commission into your pension by speaking with your employer or HR team. You will need to request this before your bonus/commission is paid to you and your employer will provide you with a written agreement whereby you are both in agreement with this action.
Will my pension amount change?
The total amount paid into your pension will not change.
If you are currently on a Relief at Source pension deduction, you will currently be contributing 80% of your pension from your take-home pay, and 20% in tax, which is refunded to you directly into your pension pot from the Government.
Once on a salary sacrifice pension, you will contribute 100% of your pension and pay zero tax, so your pension increases slightly, and your tax decreases. The amount paid into your pension pot will not change. Your employer's contribution will also remain the same unless they decide to increase this at any point.
How do I save money?
You are currently paying National Insurance on your pension contribution. This will no longer be the case once you move to a salary sacrifice pension. So you will save 8% on your pension contribution amount if you earn less than £50,270 a year, or save 2% if you earn over £50,270 a year, so your take-home pay will increase in both cases.
I am on a Net Pay Arrangement Pension scheme, why would I move to salary sacrifice?
On a Net Pay Arrangement scheme, you will be paying national insurance on your pension contributions which you cannot claim back. Once moved to a salary sacrifice pension deduction, this will no longer be the case, so your take home pay will increase.
Will reducing national insurance contributions impact our state pensions amounts?
As long as your total earnings after any salary sacrifice deductions are above £129 a week (£6,708 per year), you will be entitled to pension credits which count as a “qualifying year” for NI contributions. Therefore, your state pension will not be affected.
Does salary sacrifice impact other benefits like Universal Credit or Tax Credits?
Yes, HMRC will base your eligibility and entitlement on your post-sacrifice salary and you should inform them of any changes to ensure you are receiving your full entitlements.
Does Salary Sacrifice affect Child Benefit?
No, it won’t impact your Child Benefit amounts. However, if your earnings were too high for you to be eligible for Child Benefit, a salary sacrifice deduction can be used as a tool to reduce your “taxable earnings” into an eligibility category. You will need to advise HMRC of any changes to see if you are now eligible for Child Benefit payments.
What is the impact on SMP?
SMP is paid at 90% of your average wage for the first 6 weeks. The following 33 weeks are then paid at the Statutory rate.
To work out the 90%, your employer will use your average wage from a set date based on your baby’s due date. If a salary sacrifice was in place during that period, the average wage is based on your post-sacrifice amount.
This will not impact you if your employer pays enhanced maternity pay.
Once on maternity leave, and assuming you are enrolled in the salary sacrifice pension scheme, your employer will continue to make their contribution and will also take responsibility for paying your contribution so your statutory pay isn’t reduced by a pension contribution. These contributions will be based on your full salary as if you were still working. This ensures your pension is paid at the same rate as if you were working and your pension pot will contribute to increase throughout your maternity leave.
Apart from maternity pay is there anything else that could be impacted by Pension salary sacrifice?
Mortgages
- When applying for a mortgage, most lenders don’t consider a pension contribution to be a “commitment” as you can opt out at any time. Therefore, this type of deduction is ignored and the full gross pay is used as the basis of lending criteria. We have found one lender who might consider the salary sacrifice negatively and that is Santander Bank. Please check with your broker before completing your application. When applying, we recommend that you provide 3 x payslips as these will show your full gross reference salary, (pre salary sacrifice) pay rather than a P60 which will only reflect your taxable pay.
Leave Pay
- Sick pay and holiday pay wont be affected by a salary sacrifice as your employer will still pay any holiday pay or enhanced sick pay at the same salary level before the sacrifice is considered (know as the reference salary).
Earnings-assessed Applications
- Where an assessment of gross pay is required, it will be the reduced salary which is taken into account, thus reducing the income reportable for earnings-assessed applications.
Student Loans
- A salary sacrifice will reduce the amount of student/postgraduate loan repayments as the calculations are based on the taxable gross pay, so the reduced salary after the salary sacrifice deduction.
Other considerations
- Employees might also look to reduce their salary for some of the following reasons:
a. Reduce salary below £100,000 to negate a reduction in your personal allowance
b. Reduce salary into a lower tax band
c. Reduce salary for Child Benefit eligibility
d. Reduce salary for eligibility for Government funded support
Note that reducing a salary below £129 a week (£6708 per year) will mean you are no longer eligible for NIC credits or some statutory payments. To ensure no negative impact, we advise employers not to move any employees to a salary sacrifice deduction which would reduce a workers pay to near this lower earnings limit.
If you are a higher rate tax payer on a relief at source pension
If you are currently on a relief at source pension, you will be paying tax on your whole pension contribution. You will see your pension deducted at 80% of the contribution from your take-home pay, the other 20% has been paid in tax. The Government refunds this 20% of tax paid directly into your pension pot, known as tax relief.
However, if you are a 40% or 45% taxpayer, you will have paid more than 20% tax on your contribution amount but still only be receiving 20% in tax relief, meaning you will have overpaid tax of 20% or 25% on your pension contribution. This money is owed back to you from HMRC but you have to make a claim in order to receive a refund of overpaid tax. You can make a claim going back 4 years (including the current tax year) via HMRC’s online site, via a Self-Assessment form, or by post. Any refund due to you will be paid directly into your bank account and not into your pension scheme.
Can I move to salary sacrifice pension if I am on minimum wage?
No, your employer is not permitted to allow a salary sacrifice deduction to take you below the National Minimum Wage even if you say you are ok with it! They will be in breach of HMRCs strict minimum wage rules and so are unable to action this for you. However, you will still be able to contribute to your pension by remaining on the non-salary sacrifice workplace pension scheme.
What if I don't want to move to a salary sacrifice pension deduction?
Your employer will give you the option of remaining on the current non-salary sacrifice workplace pension scheme so just let them know and they will not move you to the new deduction.
Our company pay the Real Living Wage, should we use this threshold rather than the NMW?
No, that is the employer’s decision to pay the RLW, but HMRCs legislation states that they should be paying at least NMW.
What happens if I am off sick for a month?
You will only pay a pension contribution based on your pensionable earnings, and so your sick pay will not be greatly impacted.
Can I still take unpaid leave?
You will need to speak with your employer or HR team as this will depend on your company’s policy.
I am above State Pension Age, should I accept the move to a salary sacrifice pension?
There are a few considerations to make but primarily, the attraction of a salary sacrifice pension are the savings in national insurance contributions. However, as you will not currently be making any NI contributions, there will be no savings for you in this area. However, you may still wish consider the move for any of the following reasons:
1. to reduce your “taxable pay” for eligibility for state benefits.
2. To reduce your salary into a lower tax band
3. To move from a relief at source deduction which requires you to manually claim back tax relief.
As you are above SPA, your employer won’t move you unless you request this so you’ll need to reach out to them to let them know your preference.
Can I still increase my contributions?
Yes, you can still make requests to change your pension contributions but you’ll still need to keep them above the minimum percentage, typically 5%. With each change, your employer will provide you with a contractual change agreement. If making the change request via your Mintago platform, we will email you a copy of your contractual change, taking the admin burden from your employer.