Salary sacrifice is an extremely tax efficient way of saving for retirement. It offers benefits for both the employee and employer. It’s important that an adviser can articulate the benefits that salary sacrifice can offer and the different options available. They also need to be aware of the potential pitfalls a client could face by entering into a salary sacrifice arrangement.

This module consists of two sections and should take around 60 minutes to complete. Once you have completed all the sections there is a short self-assessment quiz to check what you have learned and a CPD certificate for up to 60 minutes can be claimed.


On completion of this module you should be able to:

  1. Explain the benefits of salary sacrifice
  2. Describe what’s required for a valid sacrifice arrangement
  3. Explain the potential drawbacks of using salary sacrifice

Learning materials

Post learning assessment

Question 1

Which of the following is NOT a potential benefit of salary sacrifice?

  1. Higher rate tax relief is given immediately without the need for self-assessment
  2. The employer will save 13.8% National Insurance (NI) on the amount sacrificed
  3. Employer contributions don’t count towards the employees annual allowance
  4. Higher rate taxpayers will generally save 2% NI on the amount sacrificed

Question 2

Which of the following TWO conditions are required for a valid sacrifice?

  1. The employee’s terms and conditions must be changed to reduce their salary in exchange for an increased pension contribution
  2. HMRC must be informed before salary may be sacrificed
  3. The arrangement must be for a period of more than 12 months
  4. The arrangement cannot be backdated and must apply to future earnings

Question 3

Entering a new salary sacrifice arrangement could lead to a reduction in the annual allowance for some high-earning clients. This is because...?

  1. it will trigger the money purchase annual allowance
  2. the individuals' net relevant earnings are reduced
  3. salary sacrifice arrangements started after 8 July 2015 will increase threshold income for the tapered annual allowance
  4. it will increase adjusted income for the tapered annual allowance

Check your answers

Claim your certificate

Any reference to legislation and tax is based on our understanding of United Kingdom law and HM Revenue & Customs practice at the date of production. These may be subject to change in the future. Tax rates and reliefs may be altered. The value of tax reliefs to the investor depends on their financial circumstances. No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of these comments.