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

Building_Surveyor

For your own personal affordability would you want the mortgage size to be based on a salary you do not currently have at your full disposal? I wouldn't.

bigadaj

Building_Surveyor wrote: »

For your own personal affordability would you want the mortgage size to be based on a salary you do not currently have at your full disposal? I wouldn't.

Well that's personal choice really, these arrangements can normally be unwound on an annual basis by most firms.

Thrugelmir

Dave_the_Ginger_Cat wrote: »

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.

That's a different scenario.

A salary sacrifice involves a contractual change. So part of the employees remuneration is paid in non cash benefits i.e. pension scheme.

In your case. The employee is merely making a pension contribution from taxable salary.

Due to the high rate of employers nic (13.8%). Employers will often pay an incentive to employees to take up salary sacrifice. By offering a higher level of pension scheme contribution. While still making a saving themselves.

[Deleted User]

I considered this a few months ago (in another thread) and the conclusion I came to was (and if I recall some agreed with me):

Salary sacrifice is entirely optional and can be ended at any time so just like any other expense it's a choice. Someone could choose to spend £10,000 per year on a lease hire car or sacrifice 25% of their £40,000 year salary: why would the mortgage company consider the former okay and the latter to mean they're unable to afford a specific mortgage?

I use salary sacrifice (although only about 10% of my salary) and it means instead of being paid £x per month and then putting £y into some sort of savings, I'm paid (£x - £y) and £y goes into "savings" (my pension) before it reaches me directly, which comes with tax benefits. The only difference to my bottom line is positive.

Why would a mortgage company look at that and treat it as anything but an optional monthly expense? If someone was spending £1,000 per month on food and ran into troubles paying their mortgage they would spend less on food. If someone ran into troubles paying their mortgage and had salary sacrifice, wouldn't they just cancel the salary sacrifice?

I choose to contribute directly on top of my salary sacrifice towards my pension too, do mortgage providers look on that as a reduction of salary in the same way as salary sacrifice? The result is the same, the only difference is the process...

Let_Us_See

Lenders consider ANY existing financial commitment when considering affordability. This would include car lease, salary sacrifice, additional pension contributions etc. etc. Are you now getting the idea?

Thrugelmir

citricsquid wrote: »

Salary sacrifice is entirely optional and can be ended at any time so just like any other expense it's a choice.

To comply with HMRC rules it has to take a formal contractual basis. So not something you can flit in and out of at a whim.

HMRC would look at such arrangements while conducting a PAYE\NIC audit. If not in place the Company would be liable for the employees and employers NIC liability on the gross payments made.

michaels

Thrugelmir wrote: »

To comply with HMRC rules it has to take a formal contractual basis. So not something you can flit in and out of at a whim.

HMRC would look at such arrangements while conducting a PAYE\NIC audit. If not in place the Company would be liable for the employees and employers NIC liability on the gross payments made.

Thanks - I have asked my employer to research whether I could suspend the sacrifice for 3 months to get the required payslips but it sounds like the answer may well be negative especially as I would then want to return to a higher rate of sacrifice to keep my annual income below 50k.

Thrugelmir

michaels wrote: »

Thanks - I have asked my employer to research whether I could suspend the sacrifice for 3 months to get the required payslips but it sounds like the answer may well be negative especially as I would then want to return to a higher rate of sacrifice to keep my annual income below 50k.

This may be a useful read.

http://www.hmrc.gov.uk/specialist/salary_sacrifice.pdf