For employees, reducing your salary through Salary Exchange involves making changes to your contract of employment and it is important to be aware of the implications this may have.
Here are some of the things you will need to bear in mind:
- The reduction in your salary could affect your entitlement to statutory benefits, such as the state pension, child and working tax credit, and statutory sick pay.
- Your entitlement to other salary-related benefits may also be affected. These could include bonuses; overtime pay and redundancy payments.
- Mortgage lenders usually base the amount they lend on the salary after sacrifice, which could mean that the maximum mortgage available to you is lower than it might otherwise be. To help avoid this, Remote can retain a notional salary for you (salary before exchange), as mortgage lenders may use this in their decision-making.
- You cannot participate in salary exchange if it results in your salary falling below the national minimum wage.
If you have any doubts regarding its suitability for you, we recommend that you seek financial advice. Our pension provider can assist with this. Remember, the value of your pension can go down as well as up and is not guaranteed. You could get back less than is paid in.