UK pension guide
How pension salary sacrifice works
With salary sacrifice, you agree to reduce contractual cash salary and your employer pays that amount into your pension instead.
In short
Because cash salary is lower, salary sacrifice can reduce Income Tax and employee National Insurance. Your employer's scheme rules determine whether it is available and how it works.
Different from a normal pension deduction
A standard employee contribution comes from your pay. Salary sacrifice changes the salary used for payroll first, so its effect on tax and National Insurance can differ.
Things to check
Ask how the arrangement affects employer pension contributions, life cover, overtime, statutory pay, mortgage applications and any salary-linked benefits. Not every employee or payment type is suitable.
It is not always the best choice
The tax saving is useful, but your personal circumstances and your employer's plan rules matter. Compare the cash impact and pension funding before changing an arrangement.
Use the salary sacrifice planner to compare an estimate. GOV.UK explains salary sacrifice and PAYE.