Salary Sacrifice??

jamesd

It may not be much better for them. It's quite common for the employer to share some of their employer NI saving with the employees, to give them an extra incentive to make contributions this way. You'd have to ask to find out. Even if they don't do it on the minimum to get full matching contributions from them, they might do it on contributions higher than that minimum, to encourage employees to put more into the pension and save them more money.

Regardless of whether they are gaining or not, a pension paid by salary sacrifice is one of the best pension deals going and you should jump at the chance. If you want the same take-home pay you can probably ask to increase your pension contributions. More take-home or higher contributions or a bit of both are available, it's just a case of picking which you want. It's easier to explain as increased pension for the same net cost so that's why it's usually done that way here.

chelsea5_2

1. Will it affect my terms of employment?
2. Can they get rid of my final sal;ary scheme easier because of this?
3. Was Di assisinated or was it just a tragic accident?

Question 3 is the not mandatory!

:money:

chelsea5_2

How is the government going to react when it sees NIC contributions fall at this massive rate?

jonnibgood

I really don't think there's a conspiracy, well not on the first 2 questions anyway!

Times are hard and this is a way for businesses to make savings (potentially help with pension scheme funding) as well as help their employees without changing really much at all - kind of money for nothing in the case of a pension salary sacrifice arrangement / Pensionplus / Smart Pensions.

To answer your specific queries:

In the base of a pension salary sacrifice, it will only amend your Terms and Conditions very slightly in relation to pension contributions and that it to enable your employer to make the pension contributions on your behalf (which is how the scheme works), nothing else will change and they cannot make any amendments to the pension scheme without specific agreement. They certainly cannot close the Final Salary Scheme or change the retirement age, etc. in this way, this would be completely illegal.

These kind of schemes have been around for over 12-15 years and so although they are new to you, they are not new to a lot of companies and organisations in the UK. Whilst the Government could change the rules in the future, it would be a massive shock to industry and at a time when employer provided pensions are needing to use every penny they can get, it would be a surprise. Indeed HMR&C refer to these schemes on their own website and are happy to give their agreement to them, some Gov't non-contributory schemes even use similar principles

montrose5

My employer has just given everybody 8 weeks notice that we are all being opted into salary sacrifice and would have to give notice to opt out!!Having read the previous comment I realise I save a bit of NI but would I save Income Tax as well. I pay £350 a month and have been told I will be £18 better off (my employer is keeping all the NI savings).Also if I opt out will I be adversely affected (other than losing £18) I'm in a final salary scheme, 6 years from retiring and just a bit concerned.
Apologies if I'm being a bit thick

JCB2020

My company closed the Final salary scheme last year and suggested we all join the Salary Sacrifice defined contribution scheme as they and the employees would save money!
They also decided to keep all the NI contribution savings for the company. In fact they didnt even offer this piece of info.

They also didnt make it clear that because the Final Salary scheme was contracted out we would be paying more NI as we had to contract back in.

When I got my first payslip following the introduction of the new scheme I was paying more tax/ni to the government not less.

So I would be very careful to check out the detail in your consultation period.

jonnibgood

Montrose 5:
What benefit is the salary sacrifice you refer to in respect of? If its pension, you will save NIC, as will your employer (I assume by your comment above, they are keeping the savings they are entitled to and you would keep yours), but in most certainty you already save tax on the contributions. By not participating you would won't be worse off in any other way other than missing out on the savings, but why would you not take part when nothing else would be affected - you're missing out on free money, admittedly no windfall but a few lattes or magazines a month!

Sounds like having an opt out is a good idea where employees are going to be better off and a lot easier for the company than having to chase down all the enrolment forms that employees have forgotten to fill in / lost.....

JCB202:
You are comparing 2 different schemes, so your advice is not directly relevant to someone who is wondering whether to go into salary sacrifice as a part of their existing pension scheme.
Admittedly you did not have a choice as the pension scheme was being closed, but the difference in tax/NIC was due to the NIC and pension contribution rates differing between schemes. 2 further points: If your employer had not offered the new scheme via salary sacrifice you would not have made any savings at all (surely something is better than nothing) and clearly setting up a new pension scheme does have considerable costs for the employer so they probably used their savings for this and you got to keep yours.

jamesd

JCB2020, so contract out again. Your defined contribution scheme may accept contracted out contributions from the government. If it doesn't then you can set up a personal pension to receive the contracted out rebates.

mitchaa

I have just had my FSP scheme scrapped in return for a matched contribution money purchase scheme:mad: 6% employee contribution, 6% employer contribution. £55k salary, £50k being pensionable.

6% of £50k = £3000pa contributions from me and £3000pa from my employer.

Now, not knowing much about salary sacrafice, I assumed that my taxable income for BOTH IT and NIC was now £40525 (£50k - £3k - £6475) so I would be saving on the 11% part of £3000 National insurance anyway?

Is this incorrect?

How would the salary sacrafice scheme work for me if i decided to drop my salary to £47k (Put the £3k difference into my pension pot, the same as before) Surely it would still be the same as before?

marklv

mitchaa wrote: »

I have just had my FSP scheme scrapped in return for a matched contribution money purchase scheme:mad: 6% employee contribution, 6% employer contribution. £55k salary, £50k being pensionable.

6% of £50k = £3000pa contributions from me and £3000pa from my employer.

Now, not knowing much about salary sacrafice, I assumed that my taxable income was now £40525 (£50k - £3k - £6475) so I would be saving on the 11% part of £3000 National insurance anyway?

Is this incorrect?

How would the salary sacrafice scheme work for me if i decided to drop my salary to £47k (Put the £3k difference into my pension pot, the same as before) Surely it would still be the same as before?

With salary sacrifice you don't pay NI on the sacrificed salary, whereas with standard pension contributions you still pay NI on what you pay into the pension scheme.

As a matter of interest, who do you work for, and what do you do?