Salary Sacrifice Pension Contributions

Rymo_2

Hi, can anyone tell me if it would be beneficial to increase my pension contributions versus saving in cash and S & S ISAs?

At the moment my employer pays in 10% as a contribution and I pay 5%, all salary sacrifice (£355 tot). This is the maximum my employer will pay in (to get the 10% I have to pay in 5%).

I am trying to work out if it would be beneficial to pay in an extra 3% to bump up my pension through salary sacrifice as opposed to the ISAs.

Would it be more cost effective?

Currently 48 years, £85K in DC schemes, £20K current and a PP with SJP (no contributions £65K). Saving between £1000 - £1300 per month in ISAs (£30K).

Lokolo

You save 20% income tax and 12% NI. (any student loan?)

So for every 68p you could get in your pay packet, you get £1 in your pension.

kidmugsy

Lokolo wrote: »

You save 20% income tax and 12% NI. (any student loan?)

So for every 68p you could get in your pay packet, you get £1 in your pension.

Plus, conceivably, you might get part of the employer's NI saving too. Worth checking.

jamesd

At 48 you're getting close to 55, the age at which you could take some pension benefits. Salary sacrifice is a great deal for basic rate tax payers and it looks likely to be worthwhile to make heavy use of this chance while you have it.

The possible confounding factors are related to what happens if you need a sustained income before age 55 and what happens if you need ti after 55. In both cases you'll need a significant non-pension pot. Before 55, enough to provide your whole necessary income. After 55 enough to top up the possible pension income until the state pensions start.

£30k doesn't seem like enough non-pension pot for the before 55 case so as long as the job seems secure you can probably boost your overall financial security by using your full ISA allowance as first priority.

Cash S&S ISAs aren't a good deal for retirement income planning, except for the shorter term emergency fund portion.

Rymo_2

Thanks jamesd, I think it makes sense to take the opportunity to put a bit more in using Salary Sacrifice. I didn't know it is so good, £100 in costing just £68!

I want to be in the position of having a choice at 60 ish as to whether or not to call it a day at work.

I have mentioned on other posts that I think cash savings are much (and incorrectly?) maligned. Several people who I suspect know much more than me have disagreed.

I think I will keep going with cash to £30K in cash, a good buffer for me, and then concentrate on the S & S ISA for the rest.