NCI-Efficient Pension Funding

Ernst & Young's Financial Management Team analyse the results of implementing salary sacrifice

Many UK pension schemes require contributions to be made by both the employee as well as by the employer — a 'contributory' arrangement. Such arrangements incur National Insurance contributions (NICs) on the amount the employee pays into the plan although the employer's contributions are exempt from NIC payments.

Implementing salary sacrifice to effectively convert a contributory pension scheme into a non-contributory scheme can result in huge NIC savings for employers and employees. The concept of salary sacrifice is not new there is a long-standing practice amongst employers to...