Adviser Centre

Salary Sacrifice Calculator.

Salary sacrifice calculator - time saving for you, money saving for your clients.

Salary sacrifice has always provided the ideal opportunity to make pension contributions whilst saving on National Insurance and possibly tax as well. We have developed an easy to use salary sacrifice calculator that helps to illustrate the financial benefits. The calculator not only performs a simple salary sacrifice operation but will also work out how much an employee can sacrifice without compromising their take-home pay - Save More And Reduce Tax (SMART). The calculator can work out figures based on a percentage of salary or on an actual fixed amount.

In just a couple of minutes, work out potential savings and new net salary after salary sacrifice.

AMOUNTS
£
%
%
£
£
%
OUTPUTS Before salary sacrifice After simple salary sacrifice SMART
Salary £ £ £
Adjusted personal allowance £ £ £
Employee income tax £ £ £
Employee NIC £ £ £
Employer NIC £ £ £
Net salary £ £ £
Total pension contribution £ £ £
Additional pension contribution using SMART
£

Important Information

Legal & General takes no responsibility for how the output from this calculator is used.

The information in this calculator is based on our current interpretation of the law and tax rates, which may change in the future. The value of tax relief will depend on the individual circumstances of your client.

The value of any money invested in a pension plan can go down as well as up, so the value of a pension fund is not guaranteed. It is particularly important your clients remember this if they are close to taking their benefits. Any money invested in a pension plan is normally tied up until retirement benefits are taken, which will generally be from age 55.

Save More And Reduce Tax (SMART).

How does it work?

SMART is a way of paying pension contributions that will increase the amount paid into the employee’s pension without reducing their take home pay.

A simple summary:

  • The employee gives up the amount of salary necessary to achieve the same net income as they would have received had they made the pension contribution of their choice to the company’s registered pension scheme.
  • This amount is paid into the employee’s pension as an employer contribution.
  • The employee and employer pay less National Insurance and the employee pays less income tax.
  • The income tax and National Insurance the employee saves and any National Insurance saving that the employer is willing to pass on is also paid into the employee’s pension as an employer contribution.

As a result:

  • The employee’s take home pay will remain the same.
  • The total amount contributed to their pension will increase.

Examples

The example assumes an employee contribution of 5% basic pay and the employer will match this at 5%, in addition the employer will pass on 50% of their National Insurance saving to the SMART contribution.

Before the introduction of SMART contributions:
Pay£Deductions£Take home pay
Basic pay (before deductions) 20,000   
  Income tax 2,000.00 
  National insurance1,445.28 
  Pension contribution 5%(net of basic rate tax) 800.00  
Basic pay 20,000Total deductions4,245.28  15,754.72
Pension contribution:
Employee contribution (5% net of basic rate tax) £800.00
Rebate of basic rate tax on employee contribution £200.00
Employer contribution (5%) £1,000.00
Total annual contribution £2,000.00
After the introduction of SMART contributions:
Pay£Deductions£Take home pay
Basic pay (before deductions)20,000   
Pension contribution 5% + employee tax and NI saving1,176.47   
  Income tax1,764.71 
  National insurance 1,304.10 
Basic Pay18,823.53Total deductions3,068.81  15,754.72
 
Employee’s sacrificed salary (5% of basic pay) £1,000.00
Employee NI saving and related tax saving £176.47
50% of employer NI saving £81.18
Employer contribution (5%)  £1,000.00
Total annual contribution£2,257.65
In this example the amount of the employee contribution has increased by £257.65 at no cost to the employee.  In addition the employer has saved 50% of the National Insurance that they would have paid on the pre-SMART salary (£81.18).

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