Waiving all or part of your salary in return for a preferential sum
In the context of retirement planning, salary sacrifice (sometimes known as ‘salary waiver’) is a contractual agreement to waive all or part of your salary in return for your employer contributing a preferential (equivalent) sum into your pension plan.
For a salary sacrifice to be effective, it must be ‘given up’ before it’s subjected to tax or National Insurance Contributions (NICs). This allows you to save the entire amount of your sacrificed income in your pension plan free of tax and NICs.