Salary Sacrifice??

ffacoffipawb

Paul_Herring wrote: »

Do they give a reason?

And presuming you're salaried, and not hourly paid, how do they work out that level?

It's illegal to reduce below the minimum wage.

Well they know how many hours a week we work - 37.5 so the maths is simple!

Devon_Sailor

cfnc wrote: »

Devon Sailor,

I think if if you were earning an amount that meant you lost your child benefit and by sacrificing an amount to enable you to keep it you would do it. It could be as little as £100 that means you lose the said £1000.

Actually, I will be in that exact position come next year, so please dont assume I am someone just commenting because I am succumbing to the "politics of envy" that seems to be pervading a lot of threads at the moment on the pensions board.

I have no problem with the child benefit being taken away for high earner but at least make it fair. At least taper the amount you lose on a sliding scale, so that it is fair for everyone.

I agree wholeheartedly.

Also which is unfair, a single parent or a couple with a stay at home parent in the higher tax band approx £42000 pa, loses all child benefit, but a couple both working earning up to a joint income of £80000 pa, still get child benefit.

Ditto. And I went to far as to make that exact point to my local MP at the time. Benfits should be fair to all, and provide a reasonable safety net for the UK's citizens. This particular fudge cost a lot of goodwill and undermined the more important fundamental principle that benefits should go to those that need them most, rather than have a "one size fits all" system.

So in answer to your rant Yes I would sacrifice salary to enable my family to keep receiving child benefit.

My disbelief was not aimed at those, as you mention, who are on the cusp. Or even those well above the cut off who are, quite rightly, looking at trying to top up to the best of their ability, their pension pots in these turbulent troubled times. I was just astounded by those who seem to be on SIGNIFICANTLY more than the £42k point, who are just trying to have the best of both worlds and shaft everyone else without a moments thought. Surely you are not condoning an attitude (as suggested by some posters) where they want to sacrifice 30, 40, 50, 60+% of wages, specifically so they can ensure they keep getting their child (and other) benefit?!

THAT was what appalled me the most...

And rant was probably un inappropriate word - more a reflection of sever disappointment at some of those who contribute on here. On other boads and threads not very far from here one can read about some people struggling daily to feed their families on their current wages. To then see how some folk feel it right and proper to jerrymander a minimum wage figure so they recieve benefits that could be used to expand the amount paid to those who can hardly put food on their table...well....I have no problem putting myself up here for comment about the post that I made.

Yorkie1

The rules have been specifically drafted to allow them to do this, so there is no reason why they should not do it.

Your ire should be better directed at those who initially drafted the rules.

Devon_Sailor

Yorkie1 wrote: »

The rules have been specifically drafted to allow them to do this, so there is no reason why they should not do it.

Your ire should be better directed at those who initially drafted the rules.

So, for example person A, earning £60k per annum, decides to salary sacrifice down to minimum wage to make best use of the ability to top up their pension pot. They choose this level to make sure that they then receive child benefit and tax credits, not only increasing the tax burden on the rest of the country, but denying the potential for bigger payouts to those who can hardly scrape a working wage.

And you see nothing wrong with this?! No, I think i continue to feel ire for those who ruthlessly exploit the unintended consequences of badly written legislation. There is, unfortunately, lots of it floating about. That is no excuse, and certainly no justification!

jamesd

Devon_Sailor, it's no more or less good or bad than choosing to pay pension contributions and get tax relief or choosing not to work to raise a child. The system is set up to encourage some actions and discourage others. One of those things it is set up to encourage is people providing for income in their old age. It's easy enough to draft rules that would bar say working tax credits to those who salary sacrifice down into the band where those are paid but that hasn't been done.

If getting working tax credits encourages someone to make really large pension contributions to get there and provide or their old age then I'm happy for us to have a system that encourages them to do it.

When I used salary sacrifice down to minimum wage myself I couldn't get down to WTC level because of a car allowance I was being paid. I could now and if it made sense for my personal financial situation I would.

I'm entirely happy for a person earning £60,000 to choose to pay £47,354 into a pension to get down to minimum wage and to get working tax credits. If the person was my age, single with no children and with no other income other than £12,646.40 they would be entitled to working tax credits of £63.10 a week, a total of £3,281.20.

chucknorris wrote: »

I suspect that this is something to do with the state second pension which I don't think I am part of as I contracted out years ago.

You're contracted back in to it from April 2012 so it'll matter to you from then. That's because contracting out for everyone is being eliminated after the current tax year.

People get State Second pension (S2P, formerly SERPS) contribitions between a starting point on the salary scale and the upper accrual point, which is roughly the higher rate tax band beginning and may end up perfectly aligned with it if that hasn't already been done.

Anyone sacrificing salary within that band loses some S2P payment because that depends on how much you're getting paid. The Additional State Pension that you get based on earnings-related S2P and formerly SERPS payments will be a little lower as a result. Not enough lower to make it a bad idea to make the pension contributions.

bilbo51

chucknorris wrote: »

Sorry but I have no idea what that means, could you please explain it? I don't know if this is relevant but I am fractional (part time) so my current gross salary is marginally below 40k, which is below the UAP anyway (hoping this spares me from whatever effect that this could have?).

I suspect that this is something to do with the state second pension which I don't think I am part of as I contracted out years ago.

Salary sacrifice in the band below £40,040 will reduce entitlement to Additional State Pension. You will be contracted back in next April. Whether any of this makes a significant difference depends on individual circumstances.

Edit: just noticed jamesd's post above. Sorry for the repetition. :doh:

jamesd

A little repetition is a good thing. Helps to reassure people that those posting are right.

StephenM_2

jamesd wrote: »

You're contracted back in to it from April 2012 so it'll matter to you from then. That's because contracting out for everyone is being eliminated after the current tax year.

Not everyone. Just those in defined contributions schemes, personal pensions and stakeholder pensions.

If (like me) you’ve contracted out into a final salary occupational pension scheme you’ll not be affected by the changes.

http://www.hmrc.gov.uk/ni/reducedrate/contractedout.htm

jamesd

True re occupational defined benefit schemes.

Phill_Anderson

Salary sacrifice - An employee gives up some of their salary in order to receive certain benefits from their employer. These may be called fringe benefits and can include things like cars, computers, housing, or contribution to retirement accounts. Depending upon the country in which this takes place, this may result in an employee’s pay being taxed at a lower rate. It is much depends upon how salary sacrifice is written and what types of benefits are offered to the employee.