Salary sacrifice: what it means for you
A smarter way to save more into your pension
Salary sacrifice helps you save more without paying more. It’s a simple switch that cuts what you pay in National Insurance while growing your pension at the same time.
Here’s how it works, and what it means for your take-home pay, benefits, and long-term savings.
What is salary sacrifice?
Instead of paying pension contributions from your take-home pay, you agree to reduce (or "sacrifice") part of your gross salary by that amount. Your employer then pays that portion straight into your pension, along with their usual contributions.
Because the sacrificed amount isn’t subject to National Insurance, both you and your employer save. Some employers even pass their savings on to you by topping up your pension further.
What does it mean for your pension?
In most cases, your savings go up, not down.
You’re contributing the same amount, but you and your employer both pay less in National Insurance.
What are the benefits of salary sacrifice
- NI and tax savings: You save more, and your employer does too.
- More in your pension: Your pot grows without you increasing your net contributions.
- Smarter take-home pay: Because you’re taxed on a smaller salary, the difference in your pay packet is often smaller than expected - and sometimes it even improves.
Will it affect other things?
It might. Here are a few things to check:
- Mortgage applications: Some lenders may use your lower salary figure.
- State benefits: Payments like statutory maternity or sick pay, which are salary-based, could be affected.
- Life cover and bonuses: If these are tied to your salary, your employer might need to adjust how they’re calculated.
For peace of mind, ask HR or Payroll how these are handled in your scheme.
Can I opt in or out?
Most employers let you join or leave a salary sacrifice arrangement at set points, like during annual enrolment, or if your circumstances change (think getting married or having a baby). Check your company’s rules to be sure.
How do I know if it’s right for me?
Start by talking to HR or Payroll. They’ll explain how your scheme works and what it means for your pay, benefits, and pension. You can also speak to a Thrive financial adviser for a full view of what’s best for your situation.
Want to check your options? You can view and update your pension preferences in the Thrive app anytime. It’s your money, built your way.