Have you heard about the recent changes to the IKEA pension plan? If you’re scratching your head wondering what it means for you or you’re a curious business owner looking to implement a salary exchange in your business, this blog is for you. Let’s dive into the nitty-gritty of the IKEA salary exchange for pension contributions and why it’s a game-changer (spoiler: it’s good news!).
What’s the deal with the IKEA pension plan change?
IKEA recently announced a switch to a salary exchange (also known as salary sacrifice) scheme for pension contributions – which is something that the Taxman has allowed employers to do for years. So, what does this mean in plain English? Essentially, you agree to exchange part of your salary for an equivalent pension contribution.
The big win here is the savings on National Insurance (NI) contributions – for those earning above the £1,048/month threshold, this can be a real financial boost. However, it’s worth noting that this change doesn’t advantage any coworker who doesn’t pay NI.
| Want to set up a salary exchange scheme for your business?Get in touch with us at [email protected] |
Why it’s a win-win (sort of)
For the average IKEA coworker, this scheme translates to an 8% saving on pension contributions. But here’s the kicker: IKEA itself saves a whopping 13.8% on those same contributions – nearly twice as much as its employees!
To put this into perspective, if a coworker earning £30k saves £72, IKEA saves £124.20. On a £60k salary, the coworker saves £36, while IKEA pockets £248.40 in savings. See the trend?
Now, it’s no surprise that IKEA hasn’t told us why they introduced this salary exchange for pension contributions, but my question is, “Why isn’t IKEA offering to share some of these savings with their employees?”
For example, if they are saving £124.20 and they put half of that saving, ie £62.10, into the employee’s pension…they would still be saving significantly and employees would be much better off. Talk about a win-win. How’s that for a real benefit?
So, to conclude, the answer to the question, “Is the IKEA salary exchange for pension contributions a good thing?” is YES! But they could make it so much better (if they wanted to).
How business owners can benefit from salary exchange
If you’re a business owner, this isn’t just an IKEA-exclusive perk. Setting up a salary exchange scheme for your team can yield significant savings on National Insurance contributions, just like it does for IKEA. And guess what? We can help you set up this scheme smoothly and efficiently. It’s a no-brainer way to boost employee satisfaction while saving money for your business.
Ready to get started?
Curious about how a salary exchange scheme can benefit your business? Or do you know someone eligible? Drop us a line at [email protected] so we can help you do it better.
We’re the friendly accountants who speak your language—no jargon, just clear, practical advice. Let’s make your business savings as sweet as IKEA’s!
