Help Centre

What if I cancel my salary sacrifice arrangement while I’m furloughed?

A salary sacrifice arrangement is a contractual agreement between you and your employer where you agree to give up some of your salary (‘the sacrifice’) in return for a benefit from your employer, such as a pension contribution. These schemes vary between different organisations so details of your agreement will be set out in your terms and conditions of employment.

Your original salary, before your pension contribution is deducted, is known as the ‘pre-sacrifice salary’ and your reduced salary after sacrifice is your ‘post-sacrifice salary’.

Your furloughed pay will be based on the post-sacrifice salary that was paid to you in the last pay period before 19 March 2020. Even if you cancel your salary sacrifice arrangement, your furloughed pay will still be based on your post-sacrifice pay and not your pre-sacrifice pay. You won’t, therefore, receive any more pay by taking this action.

You will stay auto enrolled

However, if you cancel your salary sacrifice arrangement, and you haven’t ceased membership of your workplace pension, your employer is still legally obliged to ensure your auto enrolment continues – so you will just pay your contributions in a different way.

This means if you’re furloughed and cancel your salary sacrifice arrangement, your take-home pay may be reduced further because you may now have to pay contributions net of pay (after all deductions have been taken out).

Calculations of pension contributions under a salary sacrifice agreement are complex, so please speak to your HR/ payroll team if you need any more information.

NOW: Pensions has a good technical infrastructure combined with a pension product suitable for our team. We couldn’t be happier with NOW: Pensions.
Martin Woods,