Salary sacrifice means your salary is reduced by the value of your pension contributions. Instead of you paying directly, your employer pays this amount into your workplace pension for you. This can save you money, as you and your employer pay less National Insurance contributions.

Your payslip may show a lower salary, but your take-home pay can be higher because you keep more due to lower National Insurance. Your pension contributions stay the same or may be higher, as your employer pays the full amount for you.

Before enrolling in salary exchange, consider these points:

• If your employer gives life cover, it is often based on your salary. Salary sacrifice could lower your life cover because it is based on the reduced salary amount.
• A lower salary may affect how much you can borrow for a mortgage.
• Some state benefits, like Statutory Maternity Pay, may be affected if your recorded salary is lower.

Weigh the pros and cons before you decide. If you are unsure, speak to a financial adviser for help with salary sacrifice and your pension.