Salary Sacrifice Pension

We’re on a mission to help workers maximise their pay. One of the best ways is to use the power of a pension to grow the funds you save today, for a larger retirement pot tomorrow. A salary sacrifice pension turbo charges this by allowing you to save more.

What is a salary sacrifice pension?
A salary sacrifice pension scheme allows you to exchange part of your salary for an equivalent employer pension contribution, reducing National Insurance for both you and your employer. It is a tax efficient way to put more money into your pension pot.

A standard workplace pension involves both you and your employer making contributions from your salary, with your own contributions typically taken from your pay after tax. A salary sacrifice pension works differently: instead of making pension contributions from your take-home pay, you agree to give up (or "sacrifice") part of your salary, and your employer pays that amount directly into your pension instead. We will also pass on the Employer’s NI saving we make, further increasing your pension contributions. 

Benefits of a salary sacrifice pension
With a chronic under-saving crisis occurring, tomorrow’s pensioners are likely to be worse off relative to those who retire today. Contributing to a pension full-stop is a great benefit. A salary sacrifice pension turbo charges this. It allows you to maximise the savings you can make for retirement in a tax efficient way.
·       Lower Tax and NI contributions; maximise your pension pot using the savings you make here
·       Enhanced employer contributions; we contribute the Employer NI savings we make from your lower, sacrificed salary into your pension, boosting your retirement savings
·       Tax planning; for those on the cusp of a higher tax banding, reducing your salary through a salary sacrifice pension can take you back below the threshold, saving you from paying a higher rate of tax.

Things to consider before moving ahead
It's worth noting that a lower official salary could, in some cases, affect salary-linked benefits such as mortgage applications, statutory sick pay, or certain state benefits, so it's worth considering your personal circumstances before opting in.

If you’re unsure whether salary sacrifice is for you, we would recommend you speak to a financial adviser or visit ‘MoneyHelper’, a government backed guidance advice site.

How does this look in numbers? 
Here are the numbers, that show the comparison between a workplace pension and a salary sacrifice pension. 

The below two examples assume the following:
·       A 1257L tax code, for 40 hours @ £20 per hour umbrella assignment rate
·       Standard 5% employees and 3% employers pension deductions for the standard relief at source workplace pension
·       A salary sacrifice deduction of 8%

Relief at Source Pension: 
Weekly- 
Pension deductions of £33.67
Pension contributions of £40.40 - this is the amount that will end up in your pension account; the £33.67 deduction plus the 20% tax relief added by the government. 
£476.17 net payment 
Yearly- 
Gross Pay £31,247.84 
Pension deductions £1750.84 
Pension contributions £2100.80 

Salary Sarifice Pensions: 
Weekly – 
£64 pension deductions – this is also the same amount of pension contributions, this full amount will be moved to your pension account 
£467.96 net payment 
 Yearly - 
Gross Pay £29,255.20 
Pension deductions/contributions £3328 
 Overall, these calculations show that over a full year of pension deductions, you will save £1227.20 more in pensions with the salary sacrifice scheme, whilst losing approx. £8.21 per week in net payment (or £426.92 annually) 

Want to take advantage of a salary sacrifice pension?
Salary sacrifice pension with Clipper Contracting is really easy to get up and running. We partner with Jarvis Pension, a dedicated, tech first provider. You can download their app to manage your pension.

Give our team a call on 10305 233170; they will guide you through the steps and provide you an illustration comparing different scenarios. Sacrificing salary in any context involves a formal agreement between the employer and the employee. We therefore need to ensure you have understood how much of your salary you are wishing to sacrifice. Once you are happy, you can accept our agreement via an email link and pension salary sacrifice will apply from your next payment. Please note you will need to be part of our Clipper Plus worker benefits package to have salary sacrifice pension administered.

The payment will be transferred to Jarvis Pension and you can watch your pension pot grow!

Updated on: 14/10/2026