Salary Sacrifice & Net Pay Arrangement

Question 1

What is ‘Salary Sacrafice’?

Answer 1

The employee agrees to a reduction in their salary or bonus that is equal to their pension contribution.

Question 2

What are the negative consequences of ‘Salary Sacrafice’?

Answer 2

Lower:
* salary
* Bonuses
* Pay rises
* Death in service
* Mortgages and loans.

Question 3

What is one of the benefits of ‘Salary Sacrafice’?

Answer 3

Results in lower income tax and NICs for you and lower NICs for employer

Question 4

Salary Sacrafice or Net Pay Arrangement?

Tom has a £30,000 salary with a 5% (……….) this would mean that £1,500 is reduced from his salary and the new salary would be £28,500 and the employer will make the contribution separately.

Tom will no longer pay income tax or NI contributions on the £1,500.

Answer 4

Salary Sacrafice.

Question 5

What is a ‘Net Pay Arrangement’?

Answer 5

The employer takes members’ contributions from their pay before it’s taxed.

Members only pay tax on what’s left.

Question 6

Salary Sacrafice or Net Pay Arrangement?

Anne has a £30,000 salary with 5% (…………) this would mean £1,500 would be paid into her pension and deducted from her salary over the year.

Tax and NI contributions are then paid on the full salary of £30,000.

Answer 6

Net Pay Arrangement.