AVC - Salary Sacrifice?

Reue

Hi guys, quick question for those far more knowledgable then me:

I currently pay into my company's pension scheme. The minimum amount is 4% from me (Taken as salary sacrifice) and then matched 4% by the company.

I am also making additional contributions of 6% (To bring my total to 10%) however this 6% isnt being taken from salary sacrifice thus I am not paying income tax but am paying national insurance on it.

Should the additional 6% also be salary sacrifice or is this not allowed?

thanks.

jamesd

It's allowed in law. Up to the scheme whether it lets you do it.

zagfles

It is allowed but the employer has to set it up correctly, there are all sorts of rules such as it has to be a contractual change which you can't change your mind about for a fixed period (usually a year), otherwise HMRC won't see it as "effective".

See http://www.hmrc.gov.uk/specialist/sal-sac-question-and-answers.htm & http://www.hmrc.gov.uk/manuals/eimanual/eim42750.htm

jamesd

It is not true any more that you can't change your mind about the amount for a year. As the first document you linked to says: 'it is not necessary to stipulate a period for which the arrangement must be entered into or to set out "lifestyle changes" in relation to salary sacrifice for the workplace pension scheme'.

The non-pension parts do still have the pre-auto-enrolment rules.

zagfles

jamesd wrote: »

It is not true any more that you can't change your mind about the amount for a year. As the first document you linked to says: 'it is not necessary to stipulate a period for which the arrangement must be entered into or to set out "lifestyle changes" in relation to salary sacrifice for the workplace pension scheme'.

The non-pension parts do still have the pre-auto-enrolment rules.

Ah yes it seems to have changed since I last read it. But it would also depend on the employer's scheme, mine lumps in other benefits in the salary sacrifice annual decision, and they do only allow once a year changes to be made for all salary sacrifice inc for pension.

jamesd

It changed during summer 2012 in preparation for auto-enrolment. You might find that your scheme has now updated how it works and would allow pension changes. Mine has and is happy to accept me adjusting the pension sacrifice amount to use my higher rate tax band then change down later.

zagfles

jamesd wrote: »

It changed during summer 2012 in preparation for auto-enrolment. You might find that your scheme has now updated how it works and would allow pension changes. Mine has and is happy to accept me adjusting the pension sacrifice amount to use my higher rate tax band then change down later.

No, they haven't changed it yet...

jamesd

Mine hasn't changed the scheme documentation, but when asked, had changed what they would accept.

kittysaver

I'm thinking about setting up AVCs, is this a better option than Additional Regular Contributions?

jem16

kittysaver wrote: »

I'm thinking about setting up AVCs, is this a better option than Additional Regular Contributions?

2 totally different beasts, assuming you are talking about the LGPS?

AVCs place all the investment risk on you and returns are not guaranteed.

ARCs you are buying a specific amount of extra pension with no risk to you and is guaranteed.

Which is better depends on your specific circumstances like age, length of time till retirement and your attitude to risk.