Pension Salary Sacrifice

homely60

The firm my husband works for has written to him saying that they are going to have to increase his contribution to his pension. Ashamed to say that we no nothing about his pension. He has worked for this company for 20 years and had it from the beginning. They are suggesting that he might want to opt for a Pension Salary Sacrifice. We realise we need to start taking charge of this. He is 50, what do you think of the PSS? Any advice would be greatly appreciated

Debt_Free_Chick

With salary sacrifice, he swaps part of his salary for an extra pension contribution from the company.

Let's say his extra contribution is £83 a month (£1,000 pa). As a "normal contribution" his pay would be the same but he would have a pension deduction of £83. He would get tax relief on this amount so, at the basic rate, his pay would reduce by £66.

With salary sacrifice, his pay would be £83 lower. As his pay is lower, so is his tax and national insurance contributions. His pay would reduce by less than £66 as he would get an NIC saving in addition to a tax saving. His £83 pay cut would be added to the company's contribution which is paid to the pension scheme.

On the whole, salary sacrifice is a cheaper way of paying pension contributions, but because you pay less NIC, then entitlement to some State benefits could be affected.

What does he earn?

homely60

Thank you very much for your input. He earns about £1,400 pm but it can be slightly more with bonuses.