Boosting Your Employees’ Pension Pots with Salary Exchange

Boosting Your Employees’ Pension Pots with Salary Exchange

Salary Exchange is a valuable opportunity to make tax efficient contributions to your pension scheme. There are HR and Tax implications of putting an exchange into place, so always take advice before implementing this kind of scheme.

How does boosting employee pension pots work?

In essence an employee gives up part of their salary in exchange for an employer pension contribution. Saving both the employee 12% (13.25% from 1st April 2022) and the employer 13.8% (15.05% from 1st April 2022).

Let’s look at a couple of examples

Jack is an employee that earns £35,000 per year, his workplace pension contributions are £1,438 each year, and his employers’ are £862.80

Steph is an employee who earns £60,000 per year, she makes £2,201.50 of pension contributions into the workplace pension each year and her employer makes £1,320.90 in contributions each year.

Now for the exchange. Jack and Steph exchange the value equal to their workplace pension contributions for an employers’ pension contribution.

And the savings work out like this

By exchanging his salary, Jack saves £172.56 (£190.94 from 1st April 2022) in National Insurance and his employer saves £198.44 (£216.42 from 1st April 2022) each year.

For Steph, that’s £264.18 (291.70 from 1st April 2022) in National Insurance and her employer saves £303.81 (£331.33 from 1st April 2022) each year. As a higher rate tax payer she also benefits from the additional 20% saving monthly of £36.69.

There are also additional savings for the future. The employees’ savings could be put back into their pension, increasing the value of their pot for the future. The employers’ savings could also be contributed into the employee pension to increase the value.

Contact Spotlight Accounting today

If you’d like to find out more about Salary Exchange, Spotlight offers a free review to quantify the savings both you and your employees could make.

To take advantage of this, get in touch:

Tel: 01952 462693


And a Salary Exchange pension scheme is only one way that you and your employees can save tax. Spotlight also offer a more comprehensive tax diagnostic review. Just give us a call or drop us an email to set up a meeting.

Carrie Stokes Chartered Accountant

Carrie Stokes Chartered Accountant

I work with directors of limited companies in Shropshire, Staffordshire and the West Midlands giving them a clear and up to date financial picture of their business that they understand. Looking at the numbers, what they mean and how they can be improved to grow their business.

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