Salary Exchange is quite simple, the pension scheme member gives up part of their salary and, in return, the member is given a  non-cash benefit by way of an increased pension contribution. Once salary exchange is implemented the overall pay is lower, so both employer and member pay less tax and national insurance.

The national Insurance Saving can benefit both Employer and Member or an employer can pay their national insurance saving in as an additional contribution at no extra cost.

There is the added benefit that a higher rate tax payer does not have to claim the additional tax relief reducing administration.

Whilst the Government have investigated and stopped many salary sacrifice arrangements, pensions have been ring fenced.