Can a salary exchange affect Occupational Pension Scheme contributions or retirement benefits?
• Whether contributions into an occupational pension scheme are affected by salary exchange is up to the employer. A notional level of pay – often equal to the pre-sacrifice level of pay – is often used to calculate employer and employee pension contributions so that employees who participate in salary exchange schemes are not put at a disadvantage to those who don’t. This is not a factor of whether the sacrifice is effective or not for tax and NICs purposes. • Employers should always, however, check their occupational pension scheme rules with their scheme provider to make sure the salary exchange scheme does not fall foul of these. • The issue of what pension benefits can be paid can be problematic. In the period before 6 April 2006, HMRC rules set a limit on pensions linked to final taxable earnings. Benefits that were exempt from tax could not be included in this calculation and employers needed to make sure that they did not exceed the limit. • However, this situation changed when
