NI deductions on pension payments

aroominyork

I am looking at the benefits of a salary sacrifice scheme and want to understand:

1) are employer and/or employee NI deductions made on contributions made by the EMPLOYER to a pension scheme?

2) are employer and/or employee NI deductions made on contributions made by the EMPLOYEE to a pension scheme?

MarkyMarkD

As I understand it:

(1) no and no
(2) yes and yes

So the benefit of a salary sacrifice scheme for employee pension contributions - as my employer operates - is that both the employer and the employee save NI. How those savings are split is up to the employer when the scheme is introduced.

aroominyork

The thing I'm trying to get my head around is that when there is a group scheme where both the employer and employee contribute, NI is not taken from the employer's contribution but it is taken from the employee's (even though the employee's contribution is deducted before you receive your pay). I guess this is what salary sacrifice is trying to get around, but I just wonder how we got here in the first place! Am I missing something?

MarkyMarkD

Because the employee's contribution isn't deducted from your pay for NI purposes, but is deducted from your pay for tax purposes. You only get tax relief on pension contributions, not NI relief.