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UT considers nature of salary sacrifice

In Secretary of State for Work and Pensions v NC [2024] UKUT 251 (AAC), the Administrative Appeals Chamber of the Upper Tribunal was asked to consider the effect on a pension scheme member’s social security benefits of contributions made to the scheme on behalf of a member by way of salary sacrifice. The member was in receipt of an allowance under the Employment and Support Allowance Regulations 2008, and the issue was whether deductions made from his wages which were paid into his pension scheme formed part of his earnings for the purposes of the Regulations. The Tribunal characterised the salary sacrifice as an agreement to reduce the member’s entitlement to cash pay in return for a pension benefit. It held that this did not form part of the member’s earnings, but was an amount which the member had agreed to forego in return for the employer’s agreement to make a pension contribution. The payments to the scheme were therefore employer contributions rather than employee contributions and therefore not part of the member's earnings for the purposes of the relevant means test.

 

A transcript of the judgment can be found here.


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