A salary sacrifice arrangement is an agreement between an employer and an employee. The employee gives up some of their contractual entitlement to salary in return for non-cash benefits. This includes childcare vouchers, lease car scheme (now closed) and Cycle to Work scheme.
As salary is sacrificed before deduction of tax, NHS Pension contributions and National Insurance contributions (NIC) you should fully consider the impact of paying less NHS Pension contributions and/or NIC before making a salary sacrifice.
If taking out a salary sacrifice arrangement takes your pay below the legal National Minimum Wage then you will not be able to participate.
State Pension and Benefits
Your State Pension and contribution related benefits may be affected if you pay less, or no, National Insurance contributions. For more information go to HMRC - benefits.
In a Career Average Revalued Earnings (CARE) scheme, like the 2015 NHS Pension Scheme, pension benefits are built up on a year by year basis based on your actual pensionable earnings in each year. Entering into any salary sacrifice arrangement that reduces your gross pensionable earnings will have a negative effect on the amount of pension you are able to build up in that year. The overall effect of participating in any salary sacrifice scheme would be to reduce the amount of final pension benefits you earn. More information about the NHS Pension can be found here.
In the 1995/2008 Sections participating in salary sacrifice will reduce your pensionable pay. This may affect your NHS Pension and any Life Assurance benefits which may come into payment when the reduction applies in a year on which benefits are based.