"However, a growing number of companies are offering pension salary sacrifice as a perk, and it can be a very tax-efficient way of saving into your workplace scheme. It involves an employee agreeing to give up some of their salary and move the amount they would otherwise receive into a benefit that's non-cash based in this case, extra employer contributions into their pension pot."
"The money you sacrifice comes out of your gross pay the salary before income tax and national insurance (NI) are taken off so it costs less to make a contribution than if it was done out of taxed income. By reducing your salary you also reduce how much you pay in NI. This means that your take home pay could be higher than if you paid the same sum into your pension through a traditional arrangement."
Rumours swirl about potential budget changes to pensions, with cutting tax-free cash said to be off the table while salary sacrifice schemes face scrutiny. Salary sacrifice moves agreed salary into non-cash benefits, typically extra employer pension contributions, and can operate alongside conventional workplace contributions and additional voluntary payments. Contributions come from gross pay, reducing income tax and national insurance and potentially increasing take-home pay versus taxed contributions. Lower taxable earnings can help parents earning over £60,000 retain more child benefit. Employers save on employee NI and may pass savings into pensions. The government is reportedly considering limits amid concerns higher earners are maximising the perk.
Read at www.theguardian.com
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