Salary Sacrifice

[Bazile]

Under the new - auto enrolment workplace pensions - the employer has advised that contributions will be paid via a ' salary sacrifice scheme ' - which they state will increase take home pay by reducing NI contributions .

What are the 'pros' and 'cons' of this , to the employee ?

[Hammer]

Pro - you pay less NI

Con - you pay less NI. If you are borderline for whether you pay enough NI to count as a full contribution for pension purposes you may lose out when you come to retire as you are paying slightly less. It could also affect any tax credits you get, eg for childcare costs.

https://www.moneyadviceservice.org.uk/en/articles/salary-sacrifice-schemes

[Old_Geezer]

I do not know but i do know I'd watch out for other things based on salary, that the figures used are pre sacrifice. After akll you don't want a smaller bonus or whatever.

[Cathyhuns]

As Hammer says, you pay less NI. Your employer also pays less NI and some pass part of this saving onto their employees in the form of increased employer pension contributions.

But also your salary is reduced so any benefits, whether from state or employer, which are based on your salary are correspondingly reduced. So things like life assurance from your employer.

[Bazile]

Thanks

[Hammer]

My employer does this but we have a 'notional' salary which is then reduced for the salary sacrifice, so I earn £1m per year 'notional', but then buy extra benefits and end up with only £800k take home salary. All my company benefits, pension, bonuses etc are based on my 'notional' £1m salary, so it doesn't necessary follow that you will lose out on company benefits.

[Hammer]

(I may have exaggerated slightly ;-))

[Old_Geezer]

One millipound ? That won't buy you much !