Salary sacrifice

An excellent way to boost your personal pension pot

As a contractor, saving for retirement and making the most of your pension is incredibly important, and Churchill Knight Umbrella is pleased to offer salary sacrifice to our employees.

Salary sacrifice is a great way to boost your personal pension pot significantly. It allows you to allocate a percentage of your pre-tax salary towards your pension. Not only will this help grow your retirement pot quickly, but contributions will also be exempt from tax and National Insurance.

If you would like to find out more information or request a tailored take-home pay calculation, please send us a message via the form on this page or call our friendly team on 01707 871622.

Keep reading to discover more about salary sacrifice.

What are the main benefits of using salary sacrifice?

Tax-efficient saving

The amount you allocate to your pension (your salary sacrifice) is not subject to tax or National Insurance.

Government top-up

As a basic rate taxpayer, for every £80 you contribute towards your pension contribution, the government will add a £20 top-up.

Reduce your tax liability

Salary sacrifice pension contributions are taken from your pre-tax salary, reducing your taxable income.

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What is salary sacrifice?

Salary sacrifice allows you to increase the amount of your income that you allocate towards your personal pension pot. You can receive tax relief and save up to £60,000 per tax year or up to 100% of your annual earnings—whichever is lower. You may also be able to carry forward any unused allowance from previous years. Contributions to your pension are not subject to tax and National Insurance, making salary sacrifice a very tax-efficient way to save for your future.

You can choose how much you want to boost your personal pension pot. Most commonly, contractors using salary sacrifice select a set amount or a percentage of their earnings to allocate to salary sacrifice.

Salary sacrifice isn’t for everybody. However, it might be a perfect method of saving for retirement if:

Your priority is growing your pension pot.
You’re a high-earner.
You have additional income.
You are happy to see your monthly pay retention decrease (because you’ll allocate more towards your pension).
You’re nearing your planned retirement date.

Our experts can provide a take-home pay projection based entirely on your circumstances.

To learn more about salary sacrifice or to request a calculation, please get in touch with us today using the form on this page or by calling 01707 871622.

What are the benefits of salary sacrifice?

There are many benefits of using a pension salary sacrifice scheme, including:

Grow your pension fund faster – You can choose how much of your salary to sacrifice for a higher pension contribution each week/month, allowing you to grow your pension pot more quickly.
Increased take-home pay – You may increase your take-home pay using salary sacrifice, depending on the amount you choose to sacrifice and the tax due on your remaining wage.
Reduce your tax liability – Salary sacrifice pension contributions are taken from your salary before tax is deducted, which reduces your taxable income. Both you and your employer (the umbrella company) will pay less in National Insurance Contributions, and you will also pay less income tax on your remaining salary.
Extra pension tax relief – Salary sacrifice contributions are not subject to income tax or National Insurance Contributions. This provides better tax savings as you’ll only receive tax relief at the highest rate of income tax that you pay on workplace pension contributions.

Are there any disadvantages to using a salary sacrifice scheme?

Whilst salary sacrifice offers many benefits, it isn’t for everyone, and it’s important to consider the points below before entering into a salary sacrifice arrangement:

It is not a feasible option for everyone – Employers cannot offer salary sacrifice to employees if it reduces their salary below the National Minimum Wage.
Lower take-home pay—Depending on how much salary you sacrifice, you might receive a lower take-home amount each week or month, and it’s important to consider how this may impact you. It is important to note that you can choose to sacrifice only an amount that is no more than making employee workplace pension contributions.
Entitlement to state benefits may be affected – Your entitlement to state benefits, such as a State Pension or Maternity Pay, is based on your National Insurance Contributions. As the amount of National Insurance you pay is reduced, your entitlement may be affected.
Borrowing power and life cover – The lower take-home pay from salary sacrifice may affect your borrowing options for mortgages or loans, and you may receive lower life cover. Most providers will consider salary sacrifice, so checking before choosing a provider is essential.

What is the difference between salary sacrifice contributions and workplace pension contributions?

This example explains how salary sacrifice pension contributions can boost your pension pot compared to contributing to your pension through a workplace pension scheme.

Daniel has an annual salary of £35,000. Through a workplace pension scheme, Daniel contributes 5% to his pension, and his employer contributes 3%—this is the minimum contribution for an auto-enrolment workplace pension scheme. This means that Daniel contributes £1,750, and his employer contributes £1,050 – a combined total contribution of £2,800.

Daniel can reduce his gross salary to £32,941 through salary sacrifice and still contribute 5% to his pension. His employer will pay the money he has sacrificed directly into his pension. Daniel’s total pension contribution would be £3,392.94, which is £592.94 more than would have been contributed through a workplace pension scheme.

Getting started with salary sacrifice

Whether you’re new to contracting through an umbrella company or an existing Churchill Knight Umbrella employee and would like to add salary sacrifice to your payroll service, getting started is very straightforward, and we’re here to help.

Firstly, you must decide how much you want to allocate towards your personal pension. Usually, this is a percentage of your earnings or a fixed amount for each payment frequency. You will then be required to complete a short online form requesting information about your pension provider. If you don’t have a personal pension yet, don’t worry. The following section will explain how we can help you set one up.

Once you’ve provided us with the relevant information about your personal pension pot, you can enjoy the benefits of our new salary sacrifice service. You’re free to join and leave our service as you please, and there are no joining or leaving fees.

Don’t have a personal pension yet?

If you don’t already have a personal pension set up, don’t worry! Churchill Knight Umbrella has teamed up with specialist Financial Advisers.

If you’re interested in salary sacrifice, we would be delighted to pass your details on to a professional Financial Adviser, who will contact you to offer you a free consultation. Once you’ve found the right pension provider for your circumstances, we can set up salary sacrifice quickly and without complications.

There is no obligation to use our recommended Financial Adviser, or to set up a personal pension plan. Contact us for more information.

Salary sacrifice is the perfect way to efficiently boost your personal pension pot

If you are an existing Churchill Knight Umbrella employee, you can schedule a free consultation with a specialist Financial Adviser now to discuss salary sacrifice and the benefits available to you. Please complete the short form below. We’ll pass your information onto our partner, and a specialist Financial Adviser will be in contact shortly. There is absolutely no obligation to use their service or to register with any third parties.

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