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This April, nearly all employers are experiencing a 50% hike in their company pension contributions and employees are looking at a 66% increase.

Pension Salary Sacrifice is a way to significantly reduce the cost of these increases, and it is one of only a few tax arrangements that HMRC and the Government are very comfortable with. You may have heard your financial advisor refer to it as Pension Exchange.

The arrangement works by an employee agreeing to exchange part of their gross pay for employer pension contributions of the same amount. The effect of this is that the business and the employee save National Insurance contributions on the gross pay which has been exchanged. The total pension savings stay the same; the employee sees a net pay increase and the employer sees a significant cost reduction.


Employee exchanges £100 of pay for £100 of employer pension contributions. The employee saves £12 NIC and the employer saves £13.80 in NIC. Now multiply those numbers by the number of employees and the number of paydays in the year. The total annual savings can be quite dramatic.

It is important to get the details right so we recommend you take expert advice if you want to switch to Pension Salary Sacrifice. BHP has been assisting employers to successfully implement Salary Sacrifice arrangements for over a decade. We are currently helping clients save annual NIC costs in the tens of thousands.

Our highly experienced Employer Solutions Team can assess the potential savings to both you and your workforce, advise you on how to implement the scheme, provide all the necessary paperwork and crucially help you communicate the effect of the changes to your employees.

We do provide the full service, but are equally as happy to work with your financial and pensions advisors on such an important project.

Supported by our Payroll Bureau and Financial Planning division we will guide you through the process all the way through to obtaining a HMRC clearance for your scheme.