Son asks questions on advisibilty new scheme

oldwiring

I hope this is the right place for a question on behalf of my son.

( Mods please move as appropriate if you think not )


At present he pays about 7% of his gross monthly salary in to his pension which is £115 per month (annual salary £22500, making his take home pay £1376

The new pension scheme, uses salary sacrifice, i.e his gross pay would reduce by £1800 but his his take home pay would work out the same, if not slightly more.
His employer would save on their NI £240 a year and this would be put into his pension fund.
Is it a good deal, or are there any snags with the new proposed scheme? One of his concerns is that his gross salary would be less, and how that would affect any remortgage application, when the current fixed rate ends.

atush

Salary sacrifice is a good idea, and usually means a slight increase in take home pay due to the Nat insirance he wont' be paying. The fact that his employer will give him their NICs as well, is even better.

What % are his employers contributing?

katsu

shouldn't affect his mortgage as it is his choice to be in the scheme and he could come out of it if he needed to.

Salary Sacrifice pensions are a good idea and have very few snags. I'd recommend it.

xylophone

These might help - http://www.pensionsadvisoryservice.org.uk/workplace-pension-schemes/money-purchase-schemes/salary-sacrifice

http://www.unitetheunion.org/resources/pensions/salary_sacrifice.aspx

kidmugsy

Apparently some employers will provide a letter explaining what his salary would have been if he had not opted for salary sacrifice. Whether bank and BSs care about that I don't know.

Another way to look at it is to say he should opt for it and pay plenty into his pension while he can afford it; if his mortgage gets more expensive in future, that may be the time to cut back on pension saving.

oldwiring

@Everyone
Thank you for your replies. They have been quite helpful to him

atush wrote: »

What % are his employers contributing?

3%

atush

That makes a total of 10%, which is a good starting place if you are around 20. If he is older, have him enquire if he can put in more than 7%. That is assuming he has no debt, and is saving outside the pension as well.