What does “Salary Exchange” mean?
Salary Exchange means giving up the right to receive part of your cash salary in exchange for a benefit.
Salary exchange is a tax efficient way of making payments into your pension plan. You will receive tax relief at your highest marginal rate and an employee National Insurance saving. In addition, CISI currently enhance your payment by 13.8% which represents the Company’s National Insurance saving. Please note that payment of this enhancement is at the company’s discretion.
Salary exchange is a legal arrangement, changing your contract of employment, whereby you agree to a reduction in your contractual salary in exchange for a contribution of equivalent value into the CISI pension scheme.
What is my Nominal salary?
Your nominal salary (before the Salary Exchange) will be used when calculating your pension
contributions and payments under the staff insurance policies where benefits are calculated on your
annual salary e.g. life insurance and income protection. In the event of a claim under the income
protection policy, the Salary Exchange arrangement will stop. Your nominal salary will also be used as
the reference point for any changes or payments related to salary including any future salary raises,
redundancy payment and bonuses.
What is the advantage in paying the pension contribution I make via salary exchange?
It is an advantage as you will not pay tax and national insurance on the proportion of your salary you are
Will I be able to claim additional tax relief on this contribution to my pension?
You are unable to claim tax relief on this contribution as this is classed as an employer contribution.
However you will have saved the tax and national insurance on this amount.
I already make a personal contribution to my pension, what do I have to do?
If you wish to enhance your pension contributions under a Salary Exchange arrangement, and are
currently making employee contributions, you will need to cancel the monthly amount you pay, and then
the Salary Exchange can be set up.
Employers NIC
At CISI’s discretion it may enhance the amount you are paying in to your pension via salary exchange by
adding the employers NIC to your contribution. This is discretionary and may be changed.
What happens if I leave the Institute?
If you leave the Institute, the Salary Exchange arrangement will end.
Effect of Salary Exchange on benefits
With a Salary Exchange arrangement, your gross pay is affected, which in turn can impact upon the
amount of tax and National Insurance Contributions you will pay. Some state benefits are based on the
amount of national insurance contributions you have paid, for example statutory maternity pay, child tax
credits and the state pension. While the effect of entering a Salary Exchange arrangement is likely to be
small, it will depend on your individual circumstances. Further information is available on the HMRC
Salary Exchange in to Pension
For employees who joined before 28 April 2014
If you wish to make an additional contribution to your pension via salary exchange, please complete and return to HR the attached form, agreeing to vary your contractual salary for the period the Salary Exchange arrangement is in place.
Employees who joined on or after 28 April 2014
As set out in your employment contract, 1½% of your basic salary is collected from your salary via salary
exchange, and paid with the Institute’s contribution in to your pension. After five years’ continuous
service with the Institute, the Institute’s contributions increases to 12½% of your basic salary and you
may choose if you wish to continue to contribution 1½% of your basic salary via salary exchange. Please
see your contract of employment for further information.
You can also increase the amount that you contribute by salary exchange by completing and returning the
attached form.
What is the maximum amount I can contribute to my pension via salary exchange?
You can sacrifice a maximum of 60% of your salary, but you must remember that this will impact on the
amount of money you will take home each month.
What happens when I go on maternity leave?
Statutory maternity pay (SMP) is classed as a statutory payment and cannot be reduced by Salary
Exchange schemes. Therefore the Salary Exchange arrangement will need to end when you are approx.
30 weeks pregnant. If you are contractually required to make a contribution to your pension, this will
still be deducted each month via the payroll.
What do I need to do to cancel or change my Salary Exchange arrangement?
If you would like to cancel or change your Salary Exchange arrangement, you may do so at any time
giving at least one month’s notice. See question regarding maternity leave. However any contractual
contributions via salary exchange cannot be cancelled.
Example of the advantages of contributing to your pension via salary exchange (this does not
include any contractual contributions)
