Boost your pension AND keep your take-home pay.....too good to be true?!

irishwench69

Hey peeps

I saw this article (yes, I look at sites other than MSE - don't boot me off Martin :money: ) talking about something called 'salary sacrifice'.....

Link --> http://www.everyinvestor.co.uk/everyinvestor/personal-finance/pensions/boost-your-pension-and-keep-your-take-home-pay/e/154-1019

Now is there something in this, or should it be filed under "too good to be true"?!

For the record, I'm a higher rate taxpayer, have just bought a house (well mortgage ) with my partner, and don't claim any tax credits, benefits etc.......

The idea of paying more into my pension for relatively little penalty sounds intriguing, and I'd be interested to hear if you guys think there's something in it!

HTH

IW x

dunstonh

Now is there something in this, or should it be filed under "too good to be true"?!

It's been available since 1988.

It doesnt get much coverage outside of advice channels as you need the employer to be on board. Many employers historically didnt want to know unless you were a key employee.

shays_mum

Can you do this if you are self employed??, thanks in advance

dejongj

I've been doing that for years...Although I never saw it as a sacrifice....

barvid

It's a perfectly legit system, although each scheme needs to be approved by HMRC. Works for other benefits, too - common one is childcare, and a lot of flexible benefit schemes operate via salary sacrifice.

There are some things to be aware of, though. You are reducing your salary permanently and irrevocably - HMRC will not approve the scheme if you have the right to switch back to your old salary, and any "saved" tax will become due if they find you/your employer doing this. So if you enter into a salary sacrifice agreement to reduce your salary from £20,000 to £19,000 (for example) you no longer earn £20k - you earn £19k. Some other benefits are sometimes based on the pre-sacrifice figure (commonly known as a "reference" or "notional" salary) so if you have 4 x salary life assurance you'd get £80k in the event of your death, but sometimes this isn't the case. Technically, payrises etc. are based on the NEW salary, so a 10% pay rise would be £1,900 and not £2,000, although not all employers work like this. Also, state benefits can be affected.

Andy_L

May you die silent & alone spamming scum - post reported

tstodart

A company I worked for did this, but the company trousered the NI gain on their side so it wasn't so beneficial for me. Basically only the savings on your own NI are then saved and those are only 1% after you contribute above a certain threshold.