Under a salary sacrifice arrangement the scheme becomes effectively “non contributory” with the employee “sacrificing” an equivalent amount of salary. In return for this, their employer will make a contribution to the scheme on the employee’s behalf. This type of arrangement usually means that both the member and the employer pay less national insurance and therefore generally both benefit from a “saving”.
The details of a salary sacrifice arrangement are normally described in a booklet which the employer prepares. The booklet should set out how the arrangement will work and give members the information they will need to decide whether or not salary sacrifice is right for them. This is important because, although it is designed to benefit most members, it will not necessarily be advantageous for everyone (see below).