Salary sacrifice isn’t the best option for everyone, so you should be aware of the potential drawbacks and take them into account before deciding whether or not to opt out.

Salary sacrifice could affect your current or future entitlement to a range of state benefits, including tax credits. This is because you need to earn more than the lower earnings limit (£6,240 a year or £520 a month in 2026/2027) to be eligible to receive a number of state benefits. If your earnings after salary sacrifice would fall below the lower earnings limit, you won’t be eligible for: statutory sick pay, statutory maternity or paternity pay (see below), statutory adoption pay, incapacity benefit and jobseeker’s allowance. You can find more information on state benefits below and at: gov.uk/browse/benefits

Tax credits

To check if your tax credits would be affected if you make your contributions through salary sacrifice, phone HMRC’s tax credit helpline on 0345 300 3900 or visit gov.uk/browse/benefits/tax-credit

Statutory maternity pay

If you qualify for statutory maternity pay, you’ll receive 90% of your average weekly earnings for the first six weeks of your maternity leave, followed by either £194.32 a week (standard weekly rate 2026/2027) or 90% of your average weekly earnings (whichever is lower) for the rest of your period of paid maternity leave.

You’ll continue to pay into the Fund through salary sacrifice while you receive statutory maternity pay, unless it takes your income to below the standard weekly rate. If this happens, we’ll take you out of salary sacrifice until you return to work after your maternity leave. This is to make sure that you don’t get less than the standard weekly rate and can continue to benefit from salary sacrifice where possible.

State pension

Your state pension could be lower if you haven’t paid enough national insurance before you retire. You may also be affected if you pay the married woman’s reduced rate of national insurance.

Visit gov.uk/state-pension/eligibility to find out how much state pension you would be entitled to.

National living wage

Salary sacrifice should not reduce your salary to below the national living wage. This means that, if you’re working full time (for example, 40 hours a week) and earn around £26,436.8 or less, you should take care when considering entering into a salary sacrifice scheme.