Salary Sacrifice Schemes in Schools (2026/27)

So this teacher gains around £4,217.28 of take-home pay across the lease, and gives up roughly £727.04 a year of index-linked pension from retirement onward. On a conventional 20-times multiple that pension is worth somewhere around £14,541 — meaningfully more than the take-home gain, though the take-home gain arrives now and the pension does not arrive for 25 years, which is a real and legitimate consideration rather than a trick.

Worked example: a Group 5 headteacher

Now a headteacher at the minimum of the Group 5 range, £81,457, sacrificing £700 a month — £8,400 a year — on a £50,000 car, again over three years, 15 years from retirement.

Two things stand out, and both are counter-intuitive. The first is how small the National Insurance saving actually is for a school leader: just £168.00 a year on an £8,400 sacrifice, because a headteacher's pay is already above the £50,270 National Insurance Upper Earnings Limit, where employee NI is 2% rather than 8%. The NI saving that dominates EV scheme marketing is largely a benefit for basic-rate employees below the UEL. For a head, almost all of the gain is income tax relief at 40% and the reduced pension contribution — and the latter is not a saving at all in economic terms, it is the cost of the thing, relabelled.

The second is the contribution tier. Sacrificing £8,400 drops this head from the 11.6% tier to the 10.5% tier, and because TPS tiers apply to the whole salary rather than marginally, that alone is worth £1,778.03 a year of extra take-home pay. Our Budget guide covers these tier cliff edges in general terms; here they make the scheme look unusually attractive to anyone sitting just above a boundary.

The other consequences nobody lists

Reduced pensionable pay is the headline, but a sacrifice reduces your contractual salary for several other purposes too, and the list is worth having in front of you before you sign anything.

• Death in service. The TPS death grant is calculated by reference to pensionable pay. A reduced pensionable salary reduces the lump sum payable to your family if you die in service during the lease.
• Ill-health retirement. Ill-health benefits are built on accrued pension and pensionable pay, so a period of reduced pensionable pay flows through into a reduced ill-health award if you need one.
• Any remaining final salary link. Teachers with service before 2015 who retain a final salary link have that element calculated on their best or final pensionable salary. A salary sacrifice running through the years that would otherwise set that figure can reduce it — which for a long-serving leader is potentially a much bigger effect than the CARE accrual loss.
• Statutory Maternity, Paternity and Adoption Pay. These are calculated on average weekly earnings during a set reference period. A sacrifice running through that period reduces them, and unlike occupational schemes there is no mechanism to top them back up.
• Mortgage affordability. Lenders assess your post-sacrifice salary, which is what your payslip and P60 will show. A sacrifice of several hundred pounds a month can materially change what you can borrow — which matters if a house move is anywhere in the next few years.
• Redundancy pay. Statutory and contractual redundancy calculations are generally based on your reduced contractual salary. Our redundancy guide covers how those calculations work.

• Student loan repayments fall. Repayments are calculated on post-sacrifice earnings, so a sacrifice genuinely reduces what you repay each month — though it also extends the life of the loan.
• The Child Benefit charge falls, as set out above, for anyone inside the taper.
• The Personal Allowance taper. For a leader with income over £100,000, a sacrifice reduces the income that triggers the 60% effective band between £100,000 and £125,140 — a substantial effect at the top of the leadership range.
• Your contribution tier may fall, which for anyone sitting just above one of the TPS tier boundaries is worth a disproportionate amount of cash.

Childcare vouchers and Tax-Free Childcare

The first of the three approved schemes is worth a proper section, because a lot of teachers still have a stale mental model of it and the rules have not changed in eight years.

Employer-supported childcare vouchers closed to new entrants on 4 October 2018. If you were in a scheme before that date and have stayed with the same employer without a break of more than a year, you can continue. Everyone else is outside it permanently. The replacement is Tax-Free Childcare, the government scheme under which you pay into an online account and the government adds 20p for every 80p you put in, up to £2,000 a year per child.

The two cannot run together. You must choose one, and if you leave vouchers for Tax-Free Childcare you cannot go back. For a teacher that decision has an extra dimension that a general childcare comparison will not mention: vouchers are one of the three arrangements where Teachers' Pensions keeps your contributions and your accrual on the full pre-sacrifice salary, so a legacy voucher member gives up nothing in pension terms. Tax-Free Childcare sits outside the salary sacrifice machinery entirely and has no pension effect either. So on this specific axis both are safe — which, given the rest of this page, is worth saying explicitly.

Cycle to Work: the one that still works cleanly

Cycle to Work is the only approved scheme a teacher can newly join, and on the analysis above it is the only salary sacrifice arrangement that costs a teacher nothing in pension terms. Your contributions and your accrual stay on the full gross pre-sacrifice salary, your safeguarded sum (if you have one) is unaffected under paragraph 28.3, and your employer may not withhold access if it runs a scheme, under paragraph 74.

The one thing worth watching is the relationship between the two rules. Because Teachers' Pensions requires contributions to be calculated on the pre-sacrifice figure, your monthly TPS deduction does not fall while you are on a Cycle to Work scheme — the sacrifice reduces your take-home pay by the full amount and your pension contribution stays where it was. That is the correct treatment and it is what protects your pension, but it does mean the net cost of a Cycle to Work sacrifice is slightly higher than a generic salary sacrifice calculator (which will assume pension contributions fall too) would tell you. If your payslip shows a Cycle to Work deduction and a pension contribution that has dropped, your employer has applied the wrong treatment and it is worth raising with payroll.

This is not the April 2029 National Insurance cap

One more time, because the two get merged constantly in staffroom conversation and in search results.

If you take one thing from that comparison: the 2029 measure will cost some people a modest amount of National Insurance in four years' time, and HMRC's own costing puts the average additional employee liability at £84 in 2029/30. The issue on this page can cost a teacher several hundred pounds a year of pension for life, starting the month they sign, and it is not going to be announced in a Budget because it is not a change — it is how the rules already work.

Questions to ask before you sign

If your school or trust is offering an EV scheme, or any other salary sacrifice arrangement outside the three approved ones, these are the questions worth putting in writing to your business manager or payroll team. Getting the answers in writing matters: a verbal assurance from a scheme provider's sales representative is not the same as your employer confirming how it will report your pay to Teachers' Pensions.

• Will my pensionable pay reported to Teachers' Pensions be my full salary or my post-sacrifice salary? (For an unapproved scheme the answer must be post-sacrifice — if you are told otherwise, ask them to check against Teachers' Pensions' own salary sacrifice guidance.)
• What will my pensionable pay figure actually be, in pounds, for each year of the lease?
• Will my TPS contribution tier change as a result?
• How will this affect my death in service grant during the lease?
• I have pre-2015 service with a final salary link — will this sacrifice reduce the salary used for that element?
• What are the early termination terms if I leave, am made redundant, go on maternity leave or become long-term sick?
• What is the list price of the vehicle, so I can work out the benefit-in-kind charge at 4% for 2026/27 and at the higher rates scheduled for later years?
• Is the scheme structured so that the trust carries no liability — and if so, where does that liability sit instead?

And one to ask yourself rather than your employer: how far are you from retirement? On the arithmetic above, the pension cost of an EV scheme scales with the number of years of in-service revaluation you are giving up. A teacher five years from retirement gives up far less than a teacher thirty years from it, on an identical sacrifice. That single variable changes the answer more than anything in the scheme brochure.

The honest summary is that this is a genuine trade rather than a scandal, made worse by being undisclosed. An EV salary sacrifice scheme delivers a real and immediate improvement in take-home pay, larger for higher-rate taxpayers and larger still for leaders in the Child Benefit taper or just above a pension tier boundary. It also permanently reduces the career average pension you accrue for every year you are in it, by an amount that is entirely calculable and that nobody calculates for you. The STPCD tells you which three schemes are safe. Teachers' Pensions tells you what happens with everything else. The DfE has told employers in writing. What has been missing is anyone doing the arithmetic for the teacher, which is what this page has tried to do.

Sources and what we could not verify

The three approved schemes, the income tax exemption condition, the safeguarding protection and the voluntary participation rule are quoted from the School Teachers' Pay and Conditions Document 2025 and its accompanying guidance, paragraphs 28.1 to 28.3 and paragraph 74. The approved-versus-unapproved pensionable pay treatment is quoted from Teachers' Pensions' own employer guidance on salary sacrifice. The prior approval position, effective dates, pension warning and worked example are quoted from the DfE's Electric vehicle salary sacrifice guidance for academy trusts and colleges on GOV.UK, updated 15 July 2026, and the DfE Update to academies of 8 July 2026. The zero-emission company car appropriate percentages are those legislated at the Autumn Budget 2024. Childcare voucher closure and the Tax-Free Childcare interaction are from GOV.UK and the House of Commons Library briefing on the two schemes. Accrual and revaluation mechanics are the Teachers' Pension Scheme career average rules.

• The reading that an EV scheme can never qualify under paragraph 28 because a company car benefit-in-kind is not exempt from income tax is ours. It follows directly from the wording of paragraph 28.1 and the fact that zero-emission company cars carry an appropriate percentage rather than an exemption, but no official source states it in those terms.
• The revaluation assumption is an assumption. We model CPI plus 1.6 percentage points at 4.5% a year, which is the long-run illustrative rate used across this site. Actual revaluation depends on actual inflation, and the figures at retirement will differ, possibly by a lot.
• The 20-times capital multiple is an illustration, not a valuation. It is a conventional shorthand for the capital equivalent of an index-linked pension for life and is not a transfer value, a scheme figure, or a promise.
• We have not found published data on how many schools and trusts now run EV salary sacrifice schemes, or on teacher participation rates, so we cannot say how many people this affects. The DfE's July 2026 guidance implies growing interest but does not quantify it.
• We have not modelled the lease economics. Whether an EV scheme is good value depends heavily on the specific lease rate, what is bundled into it, and what the alternative costs — none of which we can see. This page prices one omitted variable, not the whole decision.