Salary Sacrifice??

andycee

Hi there,
I'm earning 38k and just about to join the group pension scheme at work. I put in 5% and they do the same. They also offer salary sacrifice and will contribute 78% of their NIC saving back into the scheme.

All benefits like death in service, OT will be at the pre sacrifice rate so I don't lose there. I'm not mortgaged to the hilt, so my reduced salary wont affect my borrowing if I remortgage.

The only concern I have is that I'll lose out on the s2p? Will the loss there be less than the gain I'll get in the group pension?

Thanks, Andy.

jamesd

There will be a small reduction in your S2P but that'll be more than compensated for by the increase in your group pension contributions.

You might also check to see whether your employer will tell mortgage lenders your pre-sarifice "scheme salary" that other employee benefits may be based on instead of the salary after sarifice. Mine does, so the mortgage impact should be lower than it might otherwise be.

andycee

Thanks for the info James, I'll have a word with my employers about what salary they would tell potetntial lenders I earn. I have my original contract and a recent pay rise letter too, so hopefully won't be a problem if I do need to remortgage.

rrutter_2

Right I am confused - I asked my employer to py my payrise directly into my personal stakeholder pension (they do not have a company final salary pension scheme only a stakeholder and another stakeholder just seems like more paper to me). They agreed the payrise but paid me via PAYE. This now puts me into the higher tax bracket Am I correct in thinking it is better to pay this direct and NOT via PAYE? How do I change this? Also am I correct in assuming I have to now do some paperwork to get the rest of the relief back now I pay even more tax?
Thanks hope someone can reply and help

jamesd

Yes, it's better if they pay before tax and NI. That saves you and them the NI on the money so you're both better off. Also you're better off that way because you get the contributions with no tax instead of having to wait for a tax refund of the higher rate tax.

If they continue to pay you directly via PAYE instead of paying into your pension or pay your pension contributions after tax then you will need to tell HMRC about the pension contributions so they can refund any higher rate tax that has been paid on the pension contribution money.

If they change to paying before tax and NI now the effect of just one month will be quite small and you may not end up paying any higher rate tax to reclaim. Depends on just how much you end up getting as PAYE, savings, dividend and other taxable income.

skintmostofthetime

I.m not as higher earner as those whov'e been on here but have 2/3 pensions into which I can't contribrute any more - been too long but want to start another fund - can this SS be used for small amounts - say £25 /£50 per month - and what happens if your employer doesn't have ANY kind of pension scheme - I may be able to pay more in but as and when if you follow me. I'm over 50 if that makes any difference and female.
Cheers for any help.

jamesd

It can be used for any amount. The important part is that the employer must be willing to pay into your pension using before tax money. If they aren't willing to do that then it'll just be normal pension contributions, without the National Insurance benefit for employee and employer.

bownyboy

Hi there,

I'm hoping someone can help me as I can't seem to get a clear answer from my employer or my pension company.

I'm a higher rate taxpayer and currently pay £205.13 a month into a standard life stateholder pension, which equates to £256.41 paid into my pension.

Now my employer says they are happy for my payments to be made by salary sacrifice and standard life are ok with accepting payments this way. But what my employer or standard life can answer is if I continue to pay £205.13 what will the actuall figure that gets paid into my pension now? My employer will contribute the NI they've saved.

Any help appreciated.

Johnny

jamesd

brownyboy, use this Standard Life salary sacrifice calculator to get the answer.

lias

Hi,

Thank you, I think I basically understand the sacrifice pension thing now, but I am slightly confused about Tax Credits.

If my gross salary is lower (because of the sacrifice) surely I will receive more tax credits and this will be a further benefit? But isn't it covert lying, as I am actually still receiving the same nett income?

For example I recently recieved a £1000 pa rise to £20,000 a year and my tax credits correctly dropped, including the childcare element. If I then receive a "drop" in salary due to the sacrifice, surely these tax credits will rise again?

Any guidance would be most welcome as my employer is at the "negotiation with staff stage" of introducing this scheme

Thank you