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Pensions Salary Sacrifice - the pros and cons
Former_MSE_Guy
Posts: 1,650 Forumite
Rather contributing from your after-tax pay, pension contributions under a salary sacrifice scheme come from pre-tax pay.
Officially, your wage will reduce by the amount you deposit into your pension pot, which can harm credit applications, even though you're still earning the same salary in real terms.
The main benefit, and what attracts people, is you pay less National Insurance (NI) as it’s only deducted from your new lower wage. This is particularly beneficial to basic-rate taxpayers. The tax perks remain the same, though there's less admin for higher rate taxpayers.
Click reply to discuss this below.
Officially, your wage will reduce by the amount you deposit into your pension pot, which can harm credit applications, even though you're still earning the same salary in real terms.
The main benefit, and what attracts people, is you pay less National Insurance (NI) as it’s only deducted from your new lower wage. This is particularly beneficial to basic-rate taxpayers. The tax perks remain the same, though there's less admin for higher rate taxpayers.
Click reply to discuss this below.
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