Do I have to take part?
Salary sacrifice, sometimes also referred to as Smart pensions, is a legally binding agreement, although you can opt out after you’ve started. In some cases, you might automatically be included. In other arrangements, you have to sign up. Either way, you can opt out, for what are often called ‘lifestyle changes’ e.g. marriage, or the birth of a child.Salary sacrifice might not be right for you, perhaps due to your salary level and it could impact the following which are related to your salary level and NI contribution-based benefits:
- National minimum wage (your post sacrifice income can’t drop below this level)
- State Pension entitlement
- Statutory maternity, paternity and sick pay
- Working, or child tax credit
Your employer will typically communicate to you about any impact of your salary sacrifice scheme on benefits that are linked to your salary such as death-in-service and ill health schemes, redundancy payments and overtime rates. For the overwhelming majority of people though, salary sacrifice is really good news and will make a positive difference to either your take home pay, pension contributions, or both.A reference salary, effectively your pre sacrifice salary, is used to decide pay rises etc and for other things like mortgage lending so you don’t lose out by being in the scheme.