Salary Sacrifice??

marklv

jamesd wrote: »

That's a good deal. Better than mine, my employer keeps all of the employer contribution.

Unbelievable! :mad:

Paul_Herring

marklv wrote: »

If my employer offered it I would jump at the opportunity; it's better than merely increasing your pension contributions because with salary sacrifice you don't pay NI contributions on the salary that is sacrificed.

Neither does your employer. And good ones will add their saving to your contribution (no net change to them - it goes in your pension instead of the government.)

marklv

Paul_Herring wrote: »

Neither does your employer. And good ones will add their saving to your contribution (no net change to them - it goes in your pension instead of the government.)

It should be made illegal for the employers not to add their contributions based your notional salary (not the reduced version). Otherwise it's just a con trick.

jamesd

marklv wrote: »

My opinion is that a salary sacrifice scheme is a very good move if you earn £40k+, but not such a good idea if you earn less, as it could affect your entitlement to various state benefits based on NI contributions, as well as your state second pension/SERPS.

It's a better deal for those on basic rate than higher rate. Employee NI is higher at basic rate so employee NI saving is worth more. Well, really below NI upper accrual point, but close enough to basic rate. That extra employee NI gain takes the pension tax benefit for basic rate income a lot closer to the tax benefit for higher rate.

marklv wrote: »

Unbelievable! :mad:

It's not too bad if it's paying for benefits and employees are contributing only the minimum needed to get the full employer match. It's not so nice when an employee is sacrificing far more than that. The loss for me last year was around four thousand Pounds because I sacrificed all the way down to minimum wage.

It is bad for higher rate earnings, where employee NI is only 1%. The employer NI is a big part of the potential gain in the higher rate case.

thepatjohn

Where I work, I am able to specify how much I would like to contribute to my pension fund (up to an allowable limit).

kingboyk

DUS wrote: »

Does the company have to sign up to whatever pension scheme or pension provider or can I decide where to put the money? Could I even invest the money into a SIPP? How would that work?
DUS

As far as I know this didn't get answered and as it's quite important so I'm going to ask it again I'm looking to enter into a salary sacrifice agreement with my employer. Is it open to me to choose a SIPP and ask them to pay the money into it? (i.e. is the choice of pension scheme mine, theirs, or entirely up for negotiation?).

My employer is a small company (about 5 employees). I believe the other 4 already have pension plans.

Debt_Free_Chick

In a small company, there's more chance you can negotiate that the pension contribution goes to your own pension plan. Worth asking, but the employer is under no obligation to do this - expecially if they already have a plan in place.

If it goes to your own plan, you ideally need online access so you can check that the contribution has been paid each month.

kingboyk

Thanks DFC. I'm sure if they agreed to it in principle they would agree to pay it into my choice of plan too, just so long as that's allowed by HMRC. I'm going to see if I can get my head round the figures and then have a word with them!

kingboyk

OK, seperate topic so a seperate post Is there a calculator online somewhere which can put all this mumbo jumbo into hard figures for a non financially savvy dimwit (me)?

I'm earning 25k gross. I'm thinking of sacrificing, say, 6k for payment into a SIPP. How much would be paid into my pension (assuming 100% NI employer contribs are handed over to me) and what would my net pay be? (My net pay would presumably be the same as for anyone else earning 19k right, so I can just calculate that bit on listentotaxman.com?)

Is it actually as simple as I'd earn 19k gross and my pension contribution would be 6k+saved NI? Or is there saved tax to add on too? HELP before head explodes please

jamesd

Your pension contribution would start out at 6k. The income tax and employee NI is already saved in that number because it hasn't been deducted. If your employer adds all of their employer NI saving then the pension contribution would increase by 12.8% to 6768.

Your net pay would be the same as anyone earning 19k and you can use any payroll checker to calculate it.

Your employer saves some cost - only one cheque to write - by having the same pension plan for all employees, so they may be reluctant to pay directly into yours. If the employer does have one already it could be better or worse for investment choice or costs than you could get yourself.