What is a Salary Sacrifice Pension?
What if your business could reduce costs while helping employees grow their pension savings - without spending anything extra?
Salary sacrifice pensions offer a smart way to reduce NI contributions for both the employer and employee, yet many businesses are still missing out on the benefits.
At Bravo Benefits, we simplify salary sacrifice for pensions, ensuring businesses and employees alike take full advantage of this opportunity.
But what are the benefits of a salary sacrifice pension, and how can it work for you? Let’s break it down.
How Does a Salary Sacrifice Pension Work?
A salary sacrifice pension allows employees to exchange part of their gross salary in return for increased employer pension contributions of the equivalent amount. Since this exchange reduces their taxable salary, both employees and employers pay less in National Insurance (NI) contributions.
Here’s a simple breakdown:
- An employee agrees to exchange a portion of their salary.
- The employer contributes the exchanged amount directly into their pension.
- Both employer and employee save on National Insurance contributions.
April 2025: Why Salary Sacrifice Is More Essential Than Ever
From April 2025, businesses will see an increase in National Insurance costs. The employer contribution rate will go up to 15%, and the earnings threshold for National Insurance will drop, meaning more of your employees' salaries will be taxed.
This makes salary sacrifice pensions even more valuable. They help businesses save on rising costs while boosting employees' pension savings at the same time.
Is a Salary Sacrifice Pension Better Than Traditional Pension Contributions?
Many businesses find that salary sacrifice pensions are more beneficial than traditional pension contributions. Here’s why:
- Tax and NI Savings. Employers and employees both benefit from NI savings.
- Business Cost Savings. Employers can reinvest NI savings into other employee benefits or business growth.
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If you would like to find out more about our solutions, get in touch.
Common Questions About Salary Sacrifice Pensions
1. Are All Pensions Operated Through Salary Sacrifice?
No, not all workplace pensions use salary sacrifice. Traditionally, workplace pensions involve contributions from both employer and employee based on their gross salary but without the tax efficiency benefits of salary sacrifice. If your business isn’t using salary sacrifice yet, now is the time to explore how it can improve your pension offering.
2. Is There a Limit to Pension Salary Sacrifice?
While there is no fixed limit on how much an employee can sacrifice, certain factors should be considered:
- The employee’s salary cannot be reduced below the National Minimum Wage.
- The total pension contribution must remain within the Annual Allowance (currently £60,000 for most people).
We help businesses navigate these factors to ensure compliance and optimal benefits. While the mechanics of a salary sacrifice pension are easy to understand, it’s vital that you receive the appropriate professional guidance to ensure that your scheme is effective and successful.
Stress-Free Salary Sacrifice with Bravo Benefits
A salary sacrifice pension is a win-win for your business and employees. Let us take the hassle out of the process, so you can focus on what matters most - growing your business and supporting your team. We offer expert guidance to ensure salary sacrifice works in your employees’ best interests.
