Salary Sacrifice??

marklv

"Don't get me started on high-rate tax payers. More than 30% of our employees earn more than £100k and 20% earn more than £150k ..... there is no "silver bullet" to deal with the spiteful and destructive tax hikes heading their way in 2010 and then 2011, so that's another project eating advisers' fees in five figure chunks (£60k spent so far and nothing to offer affected employees!!!)."

Interesting - what industry do you work in? I can't think of a single one where 30% of employees earn more than £100k, except maybe a top City law firm or a a barrister's chambers. And what is this about 'spiteful and destructive' tax hikes? You sound like the Daily Mail editorial. People who can afford to pay more tax should pay more - simple as that. If it was up to me I would start the 50% rate much lower down the income scale than what the government is doing and probably bring in a 60% rate as well.

Debt_Free_Chick

Yes, in the City - for an insurance company.

Those who earn more already pay more - 40% of £150k is more than 40% of £50k But of course, we now have a 50% tax rate. And higher NIC. And removal of the personal allowance; and loss of tax relief on pension contributions; And a tax on employer contributions to pension schemes.

The taxes are aimed at "Fat Cat Bankers" and introduced purely to assuage the Daily Mail readers.

Tax rises will have to hit the lower paid, IMO - as many top earners will move abroad. We have plenty of offices in Europe as do most of those who employ high-earners.

The UK needs to retain its top talent; to rebuild the economy and create the wealth that the rest of us share. There's no point in taxing them out of existence.

mitchaa

blisteringblue wrote: »

My problem is I am only just a 40% tax payer (40k give or take a few hundred), but I've a poor co2 company car so I've a 6.5k Benefit in kind that I pay 40% on.

But does salary sacrifice work that way? Ie my declared salary is 40k, even if I choose to sacrifice a large chunk of this, does my benefit in kind get calculated on my full salary or that of my sacrificed salary?

Higher tax rate is set at £43,875

mitchaa

Debt_Free_Chick wrote: »

Yes, in the City - for an insurance company.

Those who earn more already pay more - 40% of £150k is more than 40% of £50k But of course, we now have a 50% tax rate. And higher NIC. And removal of the personal allowance; and loss of tax relief on pension contributions; And a tax on employer contributions to pension schemes.

The taxes are aimed at "Fat Cat Bankers" and introduced purely to assuage the Daily Mail readers.

Tax rises will have to hit the lower paid, IMO - as many top earners will move abroad. We have plenty of offices in Europe as do most of those who employ high-earners.

The UK needs to retain its top talent; to rebuild the economy and create the wealth that the rest of us share. There's no point in taxing them out of existence.

You say that, but how many are that selfish and greedy to put how much money they have in their bank in front of friends and family and life in the UK? Why would they move their children to foreign speaking lands just to have a few more pennies in the bank? It's selfish and greedy and I suspect the majorities that do have earnings in excess of £150k would put morals in front of greed and remain in the UK for the sake of their families.

Who on earth would want to move to Switzerland for example?

Let them go if they are that much money driven. Everyone is replaceable

jamesd

Debt_Free_Chick, try asking the higher rate employees if they also contribute to a personal pension, SIPP or S&S ISA and whether splitting some of the employer NI would cause them to use the company scheme instead. Any money that goes into the company scheme instead of a personal pension or S&S ISA is more money saved by the company.

The opportunity potentially being missed is to get more money put into the company scheme instead of outside schemes, saving the company more money in reduced employer NI. From the employee mix you've described it seems like an excellent one to consider this because lots of employees may be tempted by it to use the work scheme more and an outside one less.

Say an employee is putting £5,000 a year into a personal pension as well as what they are putting into the work pension. Even with a 50:50 split of employer NI, if the employee started putting that into the company pension instead via salary sacrifice that's an extra £320 in employer NI saved by the company that wouldn't otherwise be saved.

I agree that education is extremely important as well but I'm writing this because I think the company can both save more money and help the employees if there was some splitting of employer NI saving. It's possible to do both and I've very glad to read that your company is putting money and work into education - it's a very good thing!

It's good, for the employees!, that the company is already paying in 15%. Seems to be a company with generous benefits, and perhaps necessarily so given the business and tax situation.

Debt_Free_Chick

mitchaa wrote: »

You say that, but how many are that selfish and greedy to put how much money they have in their bank in front of friends and family and life in the UK?

It's only Europe - not Oz! You can be in Paris in 2 hours - it takes me 4 hours to drive to see my mother (and it would take more than 3 hrs by train).

Why would they move their children to foreign speaking lands just to have a few more pennies in the bank?

There are plenty of English schools abroad. And if the children are young enough, a foreign speaking school is great as they grow up bi-lingual.

It's selfish and greedy and I suspect the majorities that do have earnings in excess of £150k would put morals in front of greed and remain in the UK for the sake of their families.

It's no big deal - very many families work abroad on a secondment for a few years. We permanently have 15-20 UK nationals working abroad at any point in time.

Who on earth would want to move to Switzerland for example?

Well ..... our HQ is in Switzerland I'm not sure what image of Switzerland you have, but it would be amongst my top three places to live and work ... possibly even No. 1

Let them go if they are that much money driven. Everyone is replaceable

We do let them go - we help them to go. That way we retain the talent in the business, but UK plc loses the taxes they pay (and the employer's NIC) and you and I will have to pick up the shortfall And the economy, generally, loses the money they would have spent in our shops and on our services.

We're taking this off-topic, so perhaps consider starting a thread in Discussion Time. I'm happy for any of my posts to be moved or quoted on a different board.

Regards

p.s. I don't earn over £100k or anywhere near. I'm a poor remuneration/benefits/HR person who gets to deal with "this stuff".

Debt_Free_Chick

jamesd wrote: »

Debt_Free_Chick, try asking the higher rate employees if they also contribute to a personal pension, SIPP or S&S ISA and whether splitting some of the employer NI would cause them to use the company scheme instead. Any money that goes into the company scheme instead of a personal pension or S&S ISA is more money saved by the company.

The company scheme is a personal pension. We can't pay any more for high-earners due to the anti-forestalling provisions and the tax on pension contributions. We already pay 15% of pay.

Interestingly, those who haven't joined are lower earners (£25k-£50k). Again, we would pay 15% so I can't see that paying any more will make it more attractive. If they're stupid enough not to value a 15% contribution, why should we throw more money at it?

The opportunity potentially being missed is to get more money put into the company scheme instead of outside schemes, saving the company more money in reduced employer NI. From the employee mix you've described it seems like an excellent one to consider this because lots of employees may be tempted by it to use the work scheme more and an outside one less.

We can deploy the savings more efficiently, though. For example, on new benefits such as financial education.

I agree that education is extremely important as well but I'm writing this because I think the company can both save more money and help the employees if there was some splitting of employer NI saving. It's possible to do both and I've very glad to read that your company is putting money and work into education - it's a very good thing!

It's good, for the employees!, that the company is already paying in 15%. Seems to be a company with generous benefits, and perhaps necessarily so given the business and tax situation.

Our biggest challenge is that we have people who don't understand the importance of the investment decisions they have to make. We are making an extra contribution - but it's into education. If we don't do that and put more money into the pension scheme, we're simply throwing good money after bad ... it's more money for which investment decisions won't be made.

I don't disagree with you about sharing the saving. But simply shoving it in the pension scheme is not automatically "a great thing". Or rather ... not putting it in the pension scheme is not necessarily a bad thing. Much depends on what else the employer does and what the basic contribution is in the first place. If the employer were to contribute some of the NIC saving, I'd suggest doing it on a matched basis i.e. use the employer NIC to fund a further contribution, provided the employee contributes more e.g. you pay a further 1%; we'll pay a further 1%. Pensions are shared responsibilities - it's not down to employers to fund pensions. We only do it because our competitors do so we can't afford not to!!!!

Bear in mind that the Pensions Regulator is "upping the game" over governance and compliance, too. We have a personal pension scheme, but we're now expected to provide a "trustee-board" style of governance. That is not what we signed up to in 2002. Governance costs money (advisers) and resource.

And we have compulsory pension savings from 2012 - and even more compliance with the onerous auto-enrolment processes.

Anyway ..... I think we broadly agree, but I'm not in the "your employer is bad if they don't put the NIC saving into the pension scheme" camp.

blisteringblue

mitchaa wrote: »

Higher tax rate is set at £43,875

I know thanks, been doing lots of various calculations with spreadsheets provided by our Pension Consultants and http://listentotaxman.com/ is a great tool.

I realised I wasn't paying as much tax as I thought. I currently sacrifice about 8% which gets me a matched contribution from work and will possibly up this to 10 or 12 % although works contribution is capped to 8%.

Will keep the company car but certainly swapping to a greener model this time and also down grading a little as it's a car at the end of the day and I'd rather have some money back.

marklv

Debt_Free_Chick wrote: »

Yes, in the City - for an insurance company.

Those who earn more already pay more - 40% of £150k is more than 40% of £50k But of course, we now have a 50% tax rate. And higher NIC. And removal of the personal allowance; and loss of tax relief on pension contributions; And a tax on employer contributions to pension schemes.

The taxes are aimed at "Fat Cat Bankers" and introduced purely to assuage the Daily Mail readers.

Tax rises will have to hit the lower paid, IMO - as many top earners will move abroad. We have plenty of offices in Europe as do most of those who employ high-earners.

The UK needs to retain its top talent; to rebuild the economy and create the wealth that the rest of us share. There's no point in taxing them out of existence.

Sorry, but I'm sceptical of all this 'top talent' malarkey. There are plenty of very talented and intelligent people who earn not even half of what your insurance experts earn and would do the job at a much lower rate. If these guys want to move abroad, then good riddens to them. The economy is built by the sweat and blood of ordinary rank and file workers, not be overpaid geeks sitting in padded leather armchairs.

Matt002

Just after a little advise here. I have a grouped personal pension which was set up when I started my current employer.

My salary is 45000 which I sacrifice 7% of into the pension and the employer pays their NIC saving on the sacrifice in too. This brings my salary for PAYE purposes down to 41850. I then make a personal contribution of about 100 quid a month into the scheme which comes directly from my bank account the day after I get paid.

Would I be better off stopping my contribution which I pay after tax and NI and getting the employer to up the sacrifice amount by the same amount? I think I probably would due to the employer NI contribution? Would there be any disadvantages to doing this other than having a lower salary on my pay slips to use for mortgages etc?

One other thing is I normally fill in a tax return and on there I enter the amount I have paid into my pension direct from my bank account. I take it I should not be entering any of the salary sacrifice for pension contributions on there as I have paid no tax on those values anyhow?