Salary exchange

 

What is salary exchange?

Salary exchange is an arrangement where employees exchange part of their salary in return for an employer pension contribution. Because the salary is being exchanged rather than paid directly, neither the employee or the employer will pay National Insurance Contributions on the amount exchanged. Find out about how this works. 

Important update: pension salary exchange from April 2029​

The government has announced a future change to how pension salary exchange (also known as salary sacrifice) works.​

From April 2029, the National Insurance (NI) saving on pension salary exchange will be limited to the first £2,000 you contribute each year.​

If your employer allows you to exchange more than £2,000, the amount above this will still go into your pension, but it won’t receive the NI saving​.
 

What isn’t changing​

Pension income tax relief stays the same​. Salary exchange is not being removed​.

If you exchange £2,000 or less a year, nothing changes for you​

This change does not take effect until April 2029, so there is no immediate impact. We’ll keep you informed well ahead of the change.

Salary exchange guide

We can support salary exchange and tailor it to suit your needs in order to make your pension scheme as cost-effective and attractive as possible. Our employer guide explains everything you need to know about salary exchange and the key things to consider when implementing an agreement with your employees.

Read our guide (PDF, 3MB) opens in a new tab

Calculators

Work out how salary exchange could potentially benefit you and your employees. You can calculate an estimate of the potential savings based on the current National Insurance Contributions rates.

25/26 & 26/27 (xls, 7MB)

Steps to implement Salary Exchange

A visual guide to how to best implement Salary Exchange along with key aspects to consider at each stage.

Read our guide (PDF, 50KB) opens in a new tab

Checklist

Important things for you to consider when implementing Salary Exchange.

Our checklist (PDF, 130KB) opens in a new tab

Further support for you and your employees

To find out more about how we can help you with salary exchange, please speak to your scheme adviser, usual Scottish Widows contact, or if you don’t have one, please email us at WorkplacePensionsSupport@scottishwidows.co.uk.

Or for more information on salary exchange, please explore our available resources aimed to help you support your employees.

Support for you

Support for your employees

For employer use only.