Salary sacrifice and your pension

There are possible disadvantages it’s important to consider:

• If your employer is providing you with life cover, this is usually worked out as a multiple of your salary. Your employer might provide less life cover if you sacrifice some of your salary. Your employer should tell you if any workplace life cover is based on your pay before or after the salary sacrifice deduction.
• If you’re in a defined benefit scheme and you leave it in the first two years, you might not be able to get a refund of your contributions. This is because any salary sacrifice contributions would count as employer contributions.
• If you’re in a defined contribution scheme, you can only get a refund of your contributions if you opt out of or leave the scheme within 30 days of joining it. As these contributions will be made by your employer, if you opt out or leave after 30 days – your pot will remain invested and you won’t be able to access the money until the age of 55 (57 from 2028).
• Your lower salary might affect the amount of money you’re able to borrow for a mortgage. 
• Your entitlement to certain State benefits, such as Statutory Maternity Pay, might be affected. 

So if your employer offers a salary sacrifice arrangement, find out whether it’s right for you.

Your employer should give you an overview of how salary sacrifice might affect you and whether they would pay some or all of the NICs they save into your pension pot.

You can also ask your employer to calculate how salary sacrifice would affect your take home pay. You don’t have to go ahead with salary sacrifice if you don’t think you’ll benefit enough.