Calculator help

Output

Select either Basic or Detailed from the dropdown menu. These show on-screen as:

Basic - a snapshot of the before / after salary exchange results. The summary shows the employee's net take-home pay, the total cost to the employer of paying the employee's salary and levels of pension contribution.

Detailed - adds detail to the basic summary and includes the income tax and national insurance figures.

Employee name

Enter the employee's full name

Employer name

Enter the name of the current employer

Yearly salary

This is a must key field. Enter the employee's gross annual salary - the £ sign can be omitted.

Yearly employee contribution

This is a must key field. Enter the employee's annual gross pension contribution - the £ sign can be omitted. This is a monetary amount, not a percentage, and represents the amount of salary the employee wishes to exchange.

Employee contribution method

Select either Net or Gross from the dropdown menu.

Net - applies to Personal Pensions, Groups of Personal Pensions and Stakeholder pensions. Income tax / National Insurance contributions are calculated on the employee's gross salary before the net pension contribution is deducted.

Gross - applies to Occupational Pension Schemes. Income tax / National Insurance contributions are calculated after the deduction of the employee's gross pension contribution. Tax relief is therefore provided at source.

Yearly employer contribution

This is a must key field. Enter the employer's annual gross pension contribution - the £ sign can be omitted. This is a monetary amount, not a percentage, and is the amount of contribution the employer wishes to pay into the employee's pension plan. If there are no employer contributions being paid before the exchange, leave as £0.00.

Tax allowance

This is a must key field. Enter the employee's personal allowance for the current tax year - the £ sign can be omitted. If an employee has an allowance higher or lower than the standard amount of £12,500, this can be entered. 'K' tax codes should be input as a negative allowance - e.g. K310 should be entered as '-3100'.

Tax regime

Select UK (exc Scotland and Wales), Wales or Scotland from the dropdown menu depending upon the tax regime that applies to the customer.

Convert employee savings

Select either No or Yes from the dropdown menu.

No
- the employee savings generated through exchanging salary are not converted to pension contributions. 

  • The employee's gross annual salary will reduce by only the amount of the contribution being exchanged. Their take-home pay will increase as they're paying less income tax and National Insurance contributions.
  • As the employee's gross annual salary will reduce by the amount of the exchange, the cost to the employer will also reduce as they'll pay less National Insurance contributions.
  • Pension contributions will remain the same and the employer takes on the responsibility for paying the pension contributions.

Yes
- the employee savings generated through exchanging salary are converted to pension contributions.

  • The employee's gross annual salary will reduce by slightly more than the amount of the contribution being exchanged so that their take-home pay will stay the same.
  • As the employee's gross annual salary will reduce, the cost to the employer will also reduce as they'll pay less National Insurance contributions.
  • Pension contributions increase as savings are redirected to the employee's pension plan. The employer takes on the responsibility for paying the pension contributions.

Convert % of employer savings

This is a must key field which will accept a number between 0 and 100. The % sign can be omitted.

Key in:

  • 0 - the employer will retain all their National Insurance savings and redirect none back into the employee's pension plan.
  • 100 - all of the employer's National Insurance savings will be used to increase employee contributions. The employee's pension contribution increases by the whole amount of the employer National Insurance saving.
  • 50 for example, the employer will retain half of their National Insurance savings and the remaining half will be used to increase employee contributions.

Calculate button

Once the input fields are complete, or after any changes to the input fields hit this button to make sure that any changes will be carried through to the results.

Clear button

Clears all the input fields.

Last updated: 05 Apr 2019

This website is intended for financial advisers only and shouldn't be relied upon by any other person. If you are not an adviser please visit royallondon.com.

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.