Salary Sacrifice??

agent69 wrote: »

I'm 58 and a single reasonably well off higher rate tax payer. ... I've topped up my pension using salary sacrifice a couple of times over the last 5 years but was reluctant go any further due to the need to buy an annuity.

Since Alternatively Secured Pensions were introduced for those over 75 in 2006 it has not been mandatory to buy an annuity with pension money. the amount of freedom and flexibility for those who don't uy an annuity has regularly increased over the years and ASPs are now defunct, replaced by the far more flexible Flexi-access Drawdown.

agent69 wrote: »

I don't anticipate needing access to the £50k until I retire, having access to other liquid assets in my portfolio.

You're 58. You already have the right to access 100% of any money in any personal pension you have, as does anyone else who is 55 or older. Pay in £40k and take it and its tax relief out again a week later if you like. You don't have to retire, you can do this while still working if you want to. Before 6 April 2015 you were limited to 25% tax free lump sum and 6-8% a year depending on age at the common retirement ages.

agent69 wrote: »

I have £50k in a fixed rate cash ISA that that pays out in about 3 months time, and don't know what to do with it. Now that the rules have changed should I just feed all £50k into my pension by way of further sacrifice? If I understand the situation correctly every £1000 of take home pay that is sacrificed equates to £1900 extra contribution to my pension. Worst case scenario I take 25% tax free and pay basic rate tax on the 75%. That still leaves me with about £1600 for each £1000 I've sacrificed.

How much depends on your tax rate for each portion of the contribution and whether your employer shares any of their saving:

top rate: £1k in the pension saves 45% income tax and 2% employee NI so net cost is £530.
higher rate: 1k in pension saves 40% income tax and 2% employee NI so net cost is £580.
basic rate: 1k in pension saves 20% income tax and 12% employee NI so net cost is £680.

Any employer NI contribution increases the amount that goes in the pension. An employer using all of their 13.8% employee NI would change the £1k in the pension to £1138. A 50-50 split would make it 6.9%.

Also worth knowing that if you have other taxable income, you can salary sacrifice at work in the basic rate pay range but still save 40% income tax on the money. In this case your tax and NI relief is 40% + 12% and net cost is £480.

The maximum amount you can pay in is your total earned income in each tax year. If that is more than 40k there is a 40k cap instead but you can carry forward unused allowance from the past three years to go over the 40%.

agent69 wrote: »

Is this a no brainer, or have I missed something?

Nothing is a no-brainer but this is about as close as it gets.

(Thought I'd use this thread than a new thread - similar subject)
I'm 60 on Saturday - still working p/t with income of £11K and pension income of £22K from occupational pensions. I'm paying 6% salary sacrifice (matched by employer) in a flexible plan and plan to retire at 66 when state pension kicks in.

I plan to use ''flexible drawdown'' on the preent work pension for a lump sum of whole amount when I retire. I seem to remember a minimum pension income before you are allowed to use ''flexible drawdown'' for the whole amount? Is that the case ? Thanks

tommytynan123 wrote: »

I plan to use ''flexible drawdown'' on the preent work pension for a lump sum of whole amount when I retire. I seem to remember a minimum pension income before you are allowed to use ''flexible drawdown'' for the whole amount? Is that the case ?

It used to be the case but the thing formally called Flexible Drawdown no longer exists for people starting drawdown from 6 April 2015. Its replacement called Flexi-access Drawdown has no minimum income requirement.

tommytynan123 wrote: »

I'm 60 on Saturday - still working p/t with income of £11K and pension income of £22K from occupational pensions. I'm paying 6% salary sacrifice (matched by employer) in a flexible plan and plan to retire at 66 when state pension kicks in.

Why not use more salary sacrifice, down to minimum wage?

You can take out a 25% tax free lump sum from any personal pension from age 55 up. You can take out any part of the remaining 75% from the same age but your pension money purchase annual allowance will be reduced from £40k to £10k if you do it. This reduction probably doesn't matter to you.

So your most efficient plan is maximum salary sacrifice, topping up income if needed from existing pension pots or savings. This gets you at least 20% income tax saving and 12% employee NI saving on the money, a great deal even though 75% of the 20% part will be taken back in income tax when you take the money out of the pension.

I am trying to work out a suitable salary sacrifice scheme with my employer.

I wish to take my wages down to Minimum wage to gain maximum benefit.
I am unsure exactly what would constitute a minimum wage in my job. I earn £30000 approx per annum, my hours are not fixed. I would guess that over a year I average 45 hours a week. So I assume that 45x £7.20 x 52 = £16848. Is this the lowest rate I could sacrifice down to?
I am already paying £2000 a year into the company final salary scheme. The £30000 Gross wage figure is arrived at after that contribution. This salary sacrifice will be paid into the company’s defined contribution scheme that exists for new employees after the final salary scheme was withdrawn for new entrants.

Has anyone got any thoughts on whether my calculations are correct regarding the minimum wage calculations? My employer will pass on their NI contributions to the fund minus a 0.5% admin fee. The advantages of this are too generous for me to ignore.