Salary Sacrifice??

marklv

chelsea5 wrote: »

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

They will end the scheme of course! :mad:

mitchaa

marklv wrote: »

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?

I have just realised that by plugging figures into an online salary calculator and the NIC remaining the same with and without pension. I never realised we were still getting charged 11% on the pension portion which I assumed to be totally tax free.

I work with an aviation company as an Aircraft Engineer.

I wonder if this is worth mentioning to HR. Might ease the 'pain' of having our FSP robbed.

mitchaa

Actually saying that, Do I not pay NIC at 1% on earnings over £43875?

Savings surely minimal then?

marklv

mitchaa wrote: »

I have just realised that by plugging figures into an online salary calculator and the NIC remaining the same with and without pension. I never realised we were still getting charged 11% on the salary portion

I work with an aviation company as an Aircraft Engineer.

I wonder if this is worth mentioning to HR. Might ease the 'pain' of having our FSP robbed.

No, you get charged only on what you contribute - the £3,000 a year - not on the employer's contribution. So, your £55k salary would drop to £52k, not £47k as you stated earlier.

According to listentotaxman.com there is practically no difference and no advantage to you in taking up salary sacrifice, as you are well over the main NI threshold. However, if you decided to massively increase your pension contributions, then there would be a potential advantage.

Play around with this tool: http://listentotaxman.com/

marklv

mitchaa wrote: »

Actually saying that, Do I not pay NIC at 1% on earnings over £43875?

Savings surely minimal then?

You would gain less than £3 a month according to my calculation.

marklv

I hate to be the bearer of bad news, but final salary pension contributions from both employee and employer amount to around 25-27% of salary, so in order to maintain the level of pension benefits you had before, you should really increase your own contribution from 6% to 20% of salary. In this case, salary sacrifice would most likely be worthwhile.

mjm3346

montrose5 wrote: »

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

Obviously you will get a little extra take home pay for the next 6 years but your pension might be lower for the rest of your life. This is because you are lucky enough to be in a final salary scheme and your final salary will have been reduced by the sacrifice.
Are the company increasing benefits for those sacrificing?
How is the final salary figure calculated, best years pay in last 3 years, just the final years pay?

mitchaa

Im only 27 so can't really afford a 20% outlay at the moment, and company will only match 6% not the 20%. They will increase by 1% every 5yrs upto a maximum matched of 10% but that's it.

I know I wouldn't see much of an increase in take home pay, but surely employer would save 12.8% on the £3000 I had sacraficed? (12.8% of £3000 = £384)

So £384 going back into my pension pot or a good portion of it anyway is better than a kick in the teeth?

My FSP was worth 40/60 after 40yrs service of FSP. I have some years earned already worth £3k pa index linked, but money purchase is starting from fresh.

Some 40yrs worth of payments into it, should hopefully see me with a half ''FSP'' if invested wisely.

Well here's hoping anyway.

Thanks for info

marklv

mitchaa wrote: »

Im only 27 so can't really afford a 20% outlay at the moment, and company will only match 6% not the 20%. They will increase by 1% every 5yrs upto a maximum matched of 10% but that's it.

I know I wouldn't see much of an increase in take home pay, but surely employer would save 12.8% on the £3000 I had sacraficed? (12.8% of £3000 = £384)

So £384 going back into my pension pot or a good portion of it anyway is better than a kick in the teeth?

My FSP was worth 40/60 after 40yrs service of FSP. I have some years earned already worth £3k pa index linked, but money purchase is starting from fresh.

Some 40yrs worth of payments into it, should hopefully see me with a half ''FSP'' if invested wisely.

Well here's hoping anyway.

Thanks for info

Yes, you can afford it. Your salary is extremely high for someone your age - you really need to get your priorities right unless you want to retire on a small fraction of your income.

As for the £384 saved by your employer, that goes back to your employer, not your pension pot. Also, as your employer contributions will increase to 10% in a few years, you would only need to put in 15-17% of your salary to pretty much keep similar level of benefits as under the final salalry scheme. At the end of the day it's up to you.

mitchaa

marklv wrote: »

Yes, you can afford it. Your salary is extremely high for someone your age - you really need to get your priorities right unless you want to retire on a small fraction of your income.

As for the £384 saved by your employer, that goes back to your employer, not your pension pot. Also, as your employer contributions will increase to 10% in a few years, you would only need to put in 15-17% of your salary to pretty much keep similar level of benefits as under the final salalry scheme. At the end of the day it's up to you.

I have a young family and a big mortgage just now so although I agree with you, my plan was increasing my pension payments significantly (Upto 25%) when my mortgage was paid off. I have 18yrs left on that without overpayments so plan is to get it paid off somewhere between my 40th and 45th birthday. That then leaves me 20+yrs to fund my pension with a portion of what I would be saving by not having a mortgage.

That's the plan anyway. It was all easier with a FSP.