There are three types of pension that operate differently:
- Relief At Source (RAS)
- Net Pay Arrangement (NPA)
- Salary Sacrifice (SS)
Net Pay Arrangement (NPA) and Salary Sacrifice are deducted from gross pay; Relief At Source (RAS) is deducted from net pay. When gross pay is affected, this may reduce PAYE, NIC or both.
It is critical to understand which type is being used, as tax can only be reclaimed either by the pension provider or through Payroll.
| Type | Abbreviation | Gross/Net Deduction | PAYE | NIC | Tax reclaimed |
|---|---|---|---|---|---|
| Relief at source | RAS | Net | – | – | By pension provider |
| Net pay arrangement | NPA | Gross | Reduces PAYE | – | Through payroll |
| Salary sacrifice | SS | Gross | Reduces PAYE | Reduces NIC | Through payroll |