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Salary-sacrifice pension arrangements look set to take off in the next year

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More than half of employers plan to implement salary-sacrifice arrangements for their pension schemes within the next 12 months,

According to a poll by Mercer, only 27% of employers currently offer salary-sacrifice pension arrangements but a further 50% will be putting similar plans in place over the next year.

Mercer reports for a pension scheme with 500 members, an average salary of £30,000 and an average contribution of 5%, the total potential company national insurance (NI) saving is approximately £100,000 a year. In addition, there is the benefit of NI and tax savings to the members. 

Stephen Hempenstall, a senior associate in Mercer's employee benefits business, commented: "Companies are increasingly looking to their benefit programmes for cost savings and are realising that pension salary sacrifice can generate significant savings for both employers and employees.

"With future reduction in state second pension (S2P) accrual and increases in NI contributions, pension salary sacrifice will become more attractive to both the employees and the employer."

He added: "Recent payroll system advances and the availability of streamlined delivery services mean salary sacrifice is no longer the reserve of larger organisations. Organisations with only 150-200 employees are still likely to achieve a return on investment within the first 12 months of implementation."