How much is my pension worth as a salary?

MrPea

Hello

My employer contributes 12.5% of my annual salary into a pension. How do I work out how much this would be worth if it was paid directly into my salary rather than a benefit? Is it as simple as adding 12.5% of basic salary, or do I need to account for income tax?

Thanks, P

dunstonh

You would have to deduct tax and national insurance. The employer would probably deduct 4% as well as that will be mandatory for them from 2012 and cant pay it to you but it must go into a pension.

On top of that, as it switches from being a business expense to an income, you would have to pay more NI personally (as the earlier bit is employers NI) and possibly more tax (and loss of working/childrens tax credits) on the income as well.

Off the top of my head, you would be lucky to get around 3-4% net.

12.5% is a cracking pension contribution. I doubt they would even consider switching it for cash. They dont have to and with rule changes in 2012 would make it near impossible for them.

MrPea

That's interesting thanks. It wouldn't be them switching it to cash. I've been offered another job that doesn't have a pension at all (small company) and I'm trying to work out just how much they would need to offer to match what I'm effectively getting at my current place.

Is there like an on-line tool around that you can put your salary in and it does just that (unlikely, but if you don't ask...

Thanks! P

dunstonh

It will have to have a pension from 2012. They will have to pay 4%, you 3% and tax relief will be 1% (making 8%) total. That will be the absolute minimum.

With your revision on what its for, then it is effectively 12.5% added to your gross salary. No deduction for any NI or tax. This is because the employer pays it gross into your pension.