Salary 'sacrificed to pension' - what income figure will lenders use?

michaels

For tax and benefits reasons I have 'sacrificed' 25% of my gross salary to my pension 'at source', my employer pays into my pension before the salary appears on my payslip so according to my pay slips I now earn 25% less than last year. This is all fully documented. I can switch back to full salary at any time but do not wish to during the current financial year.

However I would quite like to remortgage to a low 5 year fix (I am currently on a bbr+1.99% tracker). Will any mortgage lenders look at my pre sacrifice salary or will they go strictly on what is on my pay slips?

mundibananas

I do the salary sacrafice with my pension, but on my monthly wage slip, the company also prints what my salary is before the sacrafice just as information. Is that something you could ask for?

holly_hobby

The lender will work off what the payslips show as your gross salary.

Even with an employers letter, many lenders want the payslip to show your gross salary, followed by salary sacrifice (and other deductions of course).

I would ask your employer if they can amend the formatting of your payslip to illustrate the above.
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Hope this helps

Holly

michaels

thanks both for your input.

Not sure if the payroll software would support showing the pre-sacrifice salary as the tax, NI etc are calculated off the 'gross pay' figure, it is only a small company.

Thrugelmir

holly_hobby wrote: »

Even with an employers letter, many lenders want the payslip to show your gross salary, followed by salary sacrifice (and other deductions of course).

If the salary is shown gross. Then the employer would be liable to employers NIC. Which defeats the benefit of salary sacrifice.

Catch 22 situation. As at this point in time the gross salary is per the payslip. The employer is making a contribution to the employees pension scheme. Technical point I know, but factually correct.

One of those you can't have you cake and it twice situations.

holly_hobby

Thrugelmir wrote: »

If the salary is shown gross. Then the employer would be liable to employers NIC. Which defeats the benefit of salary sacrifice.

Catch 22 situation. As at this point in time the gross salary is per the payslip. The employer is making a contribution to the employees pension scheme. Technical point I know, but factually correct.

One of those you can't have you cake and it twice situations.

Yes thanks T. I, and also suspect the OP, understand how SS works - the OP was actually asking how their pre SS salary could be demonstrated to and be accepted by lenders for affordability.

Of which the only acceptable route, is generally payslip showing the exercise (even with an employers ref supporing the fact that they take part in a SSS), a payslip is reqd. Which generally means if not possible (as mundibananas employer kindly facilitates), that the individuals net SS income will usually be the starting basis of assessment.

As you say, can't have your cake and eat it ...

Holly

Let_Us_See

michaels wrote: »

Not sure if the payroll software would support showing the pre-sacrifice

Pointless exercise. Lender's affordability models based on available income. Therefore, the answer to your simple question is "no."

Dave_the_Ginger_Cat

I have one of these, and my gross salary before sacrifices is also printed on my payslip.

My lender, who is also my employer, used the gross salary for my calcs

So as is common with these things, it depends on the lender, and it depends on the payslip and employers ref.

Let_Us_See

Perhaps your lender also being your employer provided a favourable situation. However, in current conditions, where even the smallest financial commitment and expenditure have to be declared on application, do you really believe any lender is going to ignore a 25% reduction in net income?

amnblog

Oh dear people - lots of confusion on this one.

The easy way to look at it is:

Your choice is get a salary of £20,000 and no pension contribution or salary of £15,000 and a pension contribution.

If you take the latter, your salary is £15,000.

(You cannot use your monthly pension contributions to fund your mortgage payments).

Let_Us_See

No confusion at all? The answer to OP is no.