Salary Sacrifice??

joeyvicks

Dunnit wrote: »

Perhaps the better place to start would be thinking how much money you want when you retire. That way, apart from reducing your NI contributions and tax, and keeping your child benefits, you may have a better appreciation of where you want to get to. One day you will be living on your pension contributions so whether it is £5k or £25k which you want to live on post 70 a bit further thought now rather than your take home pay may be of most benefit.
Pension changes would not happen in the same financial year so ignore the election.

Thanks for the tip although I was talking more of the CB tax change i.e. currently only 1 person from the house needs to earn over 50k for it to occur but 2x ppl could earn 49k and still get it in full!


In terms of my current finances I have two children and a partner that is currently on maternity leave so I'm more interested in my income at present whilst being mindful that I would like a good pension when I'm older ( I do feel that at 30yrs old a 13.33% pension contribution is good chunk though).


Therefore I'm looking for an option that suits my position at this moment in time.

Dunnit

Having 4 kids you will find that there is no time they stop trying to bleed you dry My eldest who has just finished uni and is working in a clothes shop until he either goes further in education or the graduate jobs come around again, walked away with £400 from a visit as my wife and I both gave him £200 to tide him over.
I guess that there is never a bad time to be stuffing your pension but a little now goes a long way. Knowing where you want to get to will make the effort easier. If you look at other Forums a lot of people are bulimic savers and spenders. Long term targets are far easier to reach with small amounts.
So how much do you want to retire with and at what age?

choccielover

Am I right in thinking that as a higher rate tax payer a benefit of salary sacrifice is that the entire 40% income tax rebate goes against my pension, as oppose to 20% being refunded into the scheme and me having to claim the balancing 20% on my tax return, the presumption being that was then paid into the pension scheme as a lump sum?

Trying to get my head around my pension arrangements and struggling with what has actually been paid over.

If I choose to pay over 5% is it the full 5% that is paid over or more the difference being the tax and no saved.
Not sure I'm making sense,
Say my pay was £2k per month and I sacrificed 5%, i.e. £100 then is £100 paid into the pot costing me £80 or is £125 paid in cosing me £100.

I'm a higher rate earner, so say £4k per month, is £200 paid in each month costing me £120 or is £250 paid in costing me £200??

I have very much confused myself with all this. I guess I can't work out if the tax relief is in addition to my sacrifice or makes up a portion of it.

Thanks chocs

jem16

choccielover wrote: »

I'm a higher rate earner, so say £4k per month, is £200 paid in each month costing me £120 or is £250 paid in costing me £200??

The former. Although you would also have a 2% NI saving as well.

I have very much confused myself with all this. I guess I can't work out if the tax relief is in addition to my sacrifice or makes up a portion of it.

Thanks chocs

Tax relief is part of it.

choccielover

Excellent, thanks Jem.

So onto my second (or is this my third..) query.

My other pension (diff employer) isn't sal sacrifice so I need to claim back the higher rate tax paid. I already do self assessment but looking at the forms it isn't entirely clear to me where I put in my pension payments. As part of the tax year was in a sal sacrifice and part not I assume it's just the gross (my payments and the tax @20%) for the non sal sacrifice pension.

There is a part where it talks about pensions but I'm not sure if this is just for personal (non workplace contributing) pensions.

Gah, this is not simples is it!!!

Chocs

Paul_Herring

You deduct salary sacrificed money from your actual gross wage figure before entering it as your gross wage, and don't include that contribution anywhere.

For contributions made from post-tax income, you enter the (post-sacrifice) gross salary (in fact you've already done this from the previous paragraph) and the total of post-tax contributions plus any relief they attract once they've reached your fund (e.g. you pay £120/m, relief of £30/m, you enter £1,800).

choccielover

Thanks Paul, but where on the form do I do this??

Happy to call the hmrc and ask but from prior experience it's a 3-4 hour call to ask them anything and you just get shunted from one dept to the next till you go back to the first person you called and get a sometimes dubious answer

Chocs

jem16

choccielover wrote: »

Thanks Paul, but where on the form do I do this??

You enter this into the section "tax relief for paying into registered pension schemes"

It's the first box and is described as

"Payments to registered pension schemes where basic
rate tax relief will be claimed by your pension provider
(called ‘relief at source’). Enter the payments and basic
rate tax"

choccielover

Thanks Jem will have a look.

Appreciate the help

agent69

I'm 58 and a single reasonably well off higher rate tax payer.

I've topped up my pension using salary sacrifice a couple of times over the last 5 years but was reluctant go any further due to the need to buy an annuity. I have £50k in a fixed rate cash ISA that that pays out in about 3 months time, and don't know what to do with it.

I don't anticipate needing access to the £50k until I retire, having access to other liquid assets in my portfolio. Now that the rules have changed should I just feed all £50k into my pension by way of further sacrifice? If I understand the situation correctly every £1000 of take home pay that is sacrificed equates to £1900 extra contribution to my pension. Worst case scenario I take 25% tax free and pay basic rate tax on the 75%. That still leaves me with about £1600 for each £1000 I've sacrificed.

Is this a no brainer, or have I missed something?