Salary Sacrifice Workplace Pensions offer a tax-efficient method of contributions, providing great savings for both you and your employees. It can be a complex subject to understand, as there’s are a number of ways you can implement Salary Sacrifice. These are known as:
To answer your query, you first need to understand how Salary Sacrifice works. When you set this up, your employee’s pension contributions are deducted from their gross pay each month.
Contributions are taken before their income is taxed, which means the employee doesn’t pay National Insurance (NI) or Income Tax on the amount sacrificed. As a result, this leads to the staff member saving money each month, as pension contributions aren’t liable for tax.
Opting for the SMART method means your employees receive a higher monthly pension contribution without having to pay anymore into the pot themselves. Rather than have the National Insurance savings added onto your workers’ net pay (Simple Salary Sacrifice), the savings go into their pension, helping to boost their retirement fund.
For example, an employee earning £30,000 who sacrifices 5% for their pension will contribute £125 to their scheme each month (£1,500 annually). Due to the fact they won’t pay National Insurance on the amount they sacrifice, each month the employee will save £15. Through the SMART option, this £15 saving also gets added into their pension pot. So, rather than saving £125 each month into their pension, they’ll actually save £140.
A Workplace Pension is an essential part of employment. But there’s a lot to consider and many rules and regulations to follow. We know that setting up a pension can be a time-consuming task, so we have a team of financial specialists to help you with the process.
If you’re looking to review or set up a new Salary Sacrifice arrangement, our team can help. We also offer pension advice to individuals to help them better understand what a pension is and how much to contribute. Call 02074425880, email help@drewberry.co.uk, or make an enquiry to get started.
Employee benefits can be a headache. But our specialists do this day-in, day-out, offering first class service when you need it most. Here’s why you should talk to us:
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