In front of the increasing costs of living and the escalation of the costs of employers in the UK, decades, a strategy has found a new life as a tool for raising retirement savings, while maintaining-and even enhances the payment of the home.
Scotland savings specialist Susan Hope told Yahoo Finance UK that the wage victim – also known as wage exchange – is a “pension tale”, emphasizing how it generates savings for employees and employers.
Hope does not waste time to distract common misconceptions. “We have to stop calling him a salary victim because the victim implies a loss,” she said.
Instead, she prefers the term for salary exchange. “This is exactly the exchange and the employees agree to give up part of their gross pay, their salary before the tax and national insurance, in exchange for the employer’s pension contribution.”
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By restructuring how contributions are made, the exchange of salary allows money to bypass deductions of pay slips, which in turn avoids tax and national insurance contributions. In this way, employees not only raise their retirement pots, but also enjoy savings that can manifest themselves as an increased net pay.
For employees, the victim of the salary works, reducing the employee’s gross salary, reducing their taxable income. This reduction can lead to an increase in the payment of the home, as the employee benefits from lower tax and national insurance contributions. Alternatively, savings from these reduced deductions can be redirected to the employee’s pension, increasing their pension contributions to a larger effective rate.
Hope said that an employee who wins an average salary in the UK from 35,000 British pounds, it is obtained up to an additional 140 pounds a year – an amount that may look modest in the short term, but accumulate to an impressive 20,000 pounds for 25 years if it is focused on a pension and reinforced.
In addition to increasing long -term retirement savings, this method also offers immediate benefits. For example, the reduction of gross salary by salary victim or salary exchange may reduce the payment of a student loan and avoid traps as a high -income tax tax or a personal allowance, which begins when a profit exceeds £ 100,000.
In addition, by receiving the right rate of tax breaks directly in their pay, taxpayers with a higher degree should no longer go through the administrative hassle to restore additional relief every January-refresh, which can save time and stress.
Employers facing increased national insurance contributions – must increase from 13.8% to 15% in April 2025 – and at the same time an increase in national salary, are under constant pressure to manage costs. Here, the exchange of salaries presents an attractive option.