Does salary sacrifice affect state pension?
For most people, salary sacrifice won't affect the state pension, but it's worth understanding why.
Understanding your pensions
🏛️ State Pension
- Paid by the government when you reach state pension age
- Based on your National Insurance contributions over your working life
- Completely separate from any workplace or private pensions
🏢 Workplace Pension
- Automatic enrolment scheme through your employer
- Both you and your employer contribute
- Managed by pension providers like now:pensions
💼 Private Pension (SIPP)
- Your personal choice - like the salary sacrifice we offer
- You control how much goes in and where it's invested
- Completely independent of state and workplace pensions
When salary sacrifice might affect state pension ⚠️
Only if your reduced taxable salary drops below £125 per week - this is the threshold for paying National Insurance for 2025/26.
Why? State pension is built up through NI contributions, so if you don't pay NI, you don't build up state pension rights for that period.
Check Your State Pension
Want to know about your state pension entitlement?
- Check your forecast: gov.uk/check-state-pension
- Get your NI record: gov.uk/national-insurance-record
- Calculate benefits: gov.uk/state-pension-calculator
- Free guidance: moneyhelper.org.uk