Salary Sacrifice??

Paul_Herring

JONESAD wrote:

[...]are you contributing anything to to it at the moment?

Yes, about 7% and they are comntribution 5%
[...]
the 20k is not my salary, just an example.

Ah right - the reasoning behind my questions was that the £160 per year seemed a little on the low side

Bear in mind, that you should not only consider the tax implications of sacrificing that '£110' - could there be a better use of it for, say, paying down a mortgage or other debt (how much interest could it save you?) Putting it into an ISA (rather than a pension fund for easier access?) Emergency fund (you do have one don't you?) Other short/mid/long term non-pension savings?


I'll leave the more experienced pension people around here to pick up on any glaring mistakes I may have made...

jamesd

JONESAD wrote: »

My question was more to do with wether it is more efficient for the savings to be passed on as net pay increase or pension contribution increase.

Either. It just depends on whether you want the money in your pay or in your pension. More money to take home probably makes it an easier sell to most employees.

There's probably an option to increase your contributions. If so, you can use that to add the extra money to the pension. Or you could start up an independent pension of your own, though you'd really need at least £25 a month, better £50, to make that worthwhile.

JONESAD

OK thanks both for your advice.

Paul_Herring

jerryphilip wrote: »

Hi,I am Jerry. There are a multiple number of downsides which you may not concerned.You have to put no extra money into the scheme to get the benefits; what you understand is you are a free pocker than an employee.
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You appear to be on the wrong thread/messageboard/planet* - what you've written makes no sense whatsoever.



[*] delete as appropriate.

giger

Am I correct in thinking that there are also considerations if you are opted out of SERPS/SP2? If the amount of NI that you will pay is lower will the SERPS/SP2 rebate also be slightly less?

We recently went through a similar thing and the advisor at work was unable to answer this question. As I am currently contracted out I chose to opt out of the NI SS until I understand it better. We were also given little time to opt out and basically told it's better for the company and you'll get a bit more cash each month (which tbh was all most people were interested in). There was no offer to re-invest the difference back into the work scheme automatically.

What are peoples views on salary sacrifice and SERPS?

jamesd

Yes, the NI rebate is based on your after-sacrifice pay. But you'll gain more from the salary sacrifice arrangement than you lose in contracted out rebate. One easy way to think of it is that the rebate is only a part of the NI you pay on each Pound but the salary sacrifice saves you the whole of that NI.

If the extra bit of take-home pay is £25 or more a month there are regular investment options available, perhaps even some pension providers, though that's pretty low. From £50 a month there are many choices for personal pensions.

Indispensable_Hobbes

I've ben given the opportunity to join a salary sacrifice scheme, the contribution would be between 3 and 6% doubly matched by the employer up to 18%. There is also the option to opt out with the same % matched.

My basic wage is 16,527, I have no dependants nor am i planning on having any (ever). Info suggests that holiday/overtime/benefits are calculated on base pay, maternity etc calculated on adjusted pay.

% can be amended annually or on a life event.

Are there any other factors I need to consider?

jamesd

jenyking, matching up to 18% is a great deal, you'll make most people jealous with that level of potential matching!

You do need to consider the need for emergency funds and strike some balance between current and future needs. It would be good to get a state pension forecast so you'll know what you can expect from that source.

The investments that you choose in a money purchase scheme are key to how well it does. Younger people tend to be much too cautious for their situation, older people sometimes a bit too bold, though often just right.

Indispensable_Hobbes

Why I meant to say was the contributions would be 18% (mine 6% + employer 12%). The are 2 choices of where it is invested to, 4 funds (equities, index linked gilts, gilts and cash) or 14 (the original 4 + mainly equities).

colshandy

debbt wrote: »

Hi,

I am the director and only employee of my ltd company. I pay myself just above the LEL to limit my PAYE to a very nominal amount and distribute to myself dividends as and when my cash flow allows. (Nothing since March!) I have only just read about salary sacrifice and am thinking about increasing my notional salary so that I can put extra savings into a pension by getting my company to pay all the NIC reduction. Would this be worth it as I find PAYE a real pain and don't want to pay my accountant even more money to do my payroll. My total income last financial year was only £6780 salary gross plus £4500 dividend. Trying to build up a reserve after a loss the previous year. No wonder I'm skint. Although doing a bit better this year thank goodness.

I have several pension schemes but most are money purchase and I need to seriously increase my contributions otherwise I might as well stop now and so qualify for pension credit. I usually pay lump sums every few years into a PPP or start an ISA.

I've tried the standard life calculator but it's not working at the moment.

Help.

Hi, I am in a similar situation as this poster. Director and employee of own ltd co. What are the limits that the company can pay into my pension. Is it salary dependant ?

Thanks in advance