What is salary sacrifice? – Rest Less

The main downside of salary sacrifice is, of course, simply that you will have a lower salary to live on. Some schemes allow you to specify how much of your salary will be exchanged. Either way, you should think carefully in advance about whether you will be able to get by on a reduced income.

Having a lower income can have other knock-on effects. For instance, if you have workplace life insurance, the entitlement will be lower as well, because this number is calculated as a multiple of your annual income. Read more in our article Do I need life insurance?

Similarly, the amount you can borrow when you apply for a mortgage is usually calculated using a multiple of your income, so a reduced salary will mean you can borrow less than you might otherwise have been able to.

Also bear in mind that if your income falls below the level at which you make National Insurance contributions this will have other effects. It may disqualify you from Statutory Maternity pay if you become pregnant, for example, or if you have not paid 35 full qualifying years of contributions by retirement age then you will not qualify for the full amount of the new State Pension. Find out more about the State Pension in our guide How the State Pension works.

Does your workplace have a salary sacrifice scheme? Do you take part and what do you think? We’d be interested in hearing from you. You can join the conversation on the Rest Less Community forum or leave a comment below.

Author: wpadmin

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