Salary sacrifice is a way to make your defined contribution (DC) scheme even more tax efficient and one of the 12 areas identified by our DC MOT for ensuring DC pensions and associated benefits are in good shape. But we find lots of employers are not making use of this arrangement.
All employee pension contributions are subject to national insurance contributions paid by the employee and the employer. Using salary sacrifice, these costs can be removed — saving money for your people and you the employer.
Salary sacrifice, also known as salary exchange, enables an employee to swap part of their salary for a non-cash benefit from their employer — usually through increased pension savings. This can also open up opportunities for employees to receive state benefits (for example, child benefit) they may not otherwise be entitled to.
How does salary sacrifice work?
In this video, Mercer’s Carla Rawlinson takes a look at salary sacrifice. Subjects she covers include:
- How salary sacrifice works
- The potential savings for employers and employees
- The need for careful planning
And if you don't already work with Mercer on DC pensions, get in touch. We’d be delighted to help you benchmark your defined contribution scheme against other UK employers for free — to help you identify ways you can save money, reduce risk and improve the outcomes for you and your people.
Before you access this page, please read and accept the terms and legal notices below. You’re about to enter a page intended for sophisticated, institutional investors only.
This content is provided for informational purposes only. The information provided does not constitute, and should not be construed as, an offer to sell, or a solicitation of an offer to buy, any securities, or an offer, invitation or solicitation of any specific products or the investment management services of Mercer, or an offer or invitation to enter into any portfolio management mandate with Mercer.
Past performance is not an indication of future performance. If you are not able to accept these terms and conditions, please decline and do not proceed further. We reserve the right to suspend or withdraw access to any page(s) included on this website without notice at any time and Mercer accepts no liability if, for any reason, these pages are unavailable at any time or for any period.