Chartered Financial Planner Susan Hope, a business development director at Scottish Widows and a pensions advocate, writes about how, as National Insurance changes take effect, salary exchange (also called salary sacrifice), could be a new opportunity for Financial Planners. 

As of Sunday 6 April, the dual increases to employer national insurance contributions (NIC) and the national living wage (NLW) will be at the forefront of many employers' minds. 

Cost saving initiatives that also support the delivery of employee benefits are particularly attractive to businesses.

Salary exchange is one tool which can deliver both, making it an ideal discussion for potential clients and can re-energise discussions with existing clients. 

The topline statistic to remember is that for every £100,000 in exchanged salary paid as a pension contribution, employers can save £15,000 in NICs annually. For employees the NIC saving is 8% for basic rate taxpayers and 2% for higher rate taxpayers.  

Advisers can guide clients on how to use these savings to help support their company's ambitions. Examples include the following:

• A portion of the savings could be redirected back into the business to aid running costs.
• It could be used to fund specific employee benefits, addressing employee needs.
• The employee saving could either be used to boost take home pay or increase retirement savings.

Advisers can demonstrate an immediate return on investment via a salary exchange exercise, either implementing a new scheme or reviewing an existing scheme in light of the changes.

New salary exchange implementation 

Highlighting the financial benefits using the 2025/26 NIC rates is an obvious starting point, as is deciding on the route for both the employer and employee savings.

Communication is key, as is providing relevant proof points for employees. The common usage of the phrase ‘salary sacrifice’ infers that something is being given up and thus loss aversion bias kicks in for many. Whereas salary exchange, our preferred language, more accurately describes the mutually beneficial exchange that occurs. Making sure payroll is engaged is important to the process as they can facilitate the salary exchange model chosen.

Additionally, deciding on an implementation method, either opt in, opt out or contractual, and the merits of each should be explained and discussed. Equally, ensuring a salary exchange floor (to avoid crossing NLW), maximum exchange amounts, approach to variable pay, and a clear position on maternity pay and other statutory benefits are all critical parts of the process.

Reviewing existing salary exchange schemes 

The changes outlined in the Autumn budget provide an opportunity to reignite client conversations and to ensure maximum savings and value are being extracted from the scheme.

Advisers can start conversations by exploring what additional savings are going to be available as a result of the increased NI rate. This leads nicely into what businesses can then do with these increased savings, including new staff benefits. It is also worth checking if this can be used as an opportunity to check employee participation levels, and explore if they can be increased by implementing salary exchange.

Using the above as discussion points, there is an opportunity for advisers to position themselves as a strategic partner throughout implementation and review, including wider employee benefits, whilst continuing to create ongoing value and generating fee income at the same time.  

Susan Hope is a business development director at Scottish Widows, where she leads a team focused on workplace pensions. She has over 30 years of experience in the financial sector and is a Chartered Financial Planner and advocate for salary exchange and closing the gender pension gap. In addition to her professional achievements, she educates others through webinars and podcasts. She is currently Professional Adviser’s Women in Financial Advice Role Model of the Year for the second year running. 

https://adviser.scottishwidows.co.uk/