The bene ts of salary sacri ce

Does your employer offer a salary-sacrifice option as a way of making pension savings? If so, it’s very likely to make sense for you to take them up on the offer. With these schemes you agree to sacrifice some of your salary, with your employer paying this money into your pension fund instead, rather than the conventional arrangement, whereby you make pension contributions from your salary.

The advantage is that you pay no income tax or national insurance on the salary you give up. By contrast, when you make pension contributions from your pay, you can claim incometax relief, but you’re still paying national insurance. Employers also save on national insurance, with no employers’ contribution to pay on the salary sacrificed.

Some even agree to share this saving with staff, typically by topping up their pension contributions. It’s a win-win situation in most cases. You need to tread carefully if you’re applying for a mortgage, however. Your reduced salary may affect how much you can borrow . And if you have benefits linked to your salary, check how these will be affected. But for most people, salarysacrifice schemes are a more efficient way to contribute to an employerrun pension scheme.