Salary sacrifice a large proportion of salary or not

haras_nosirrah

Hi.

Last year I earned 50k, way things are going this year it will be more like 62k. I work in a heavily commissioned based role where my basic is 26,400. I currently salary sacrifice 15% and employer 8% of my basic only so I pay £330 into pension.

As I am going to be heading over the 60k and will therefore lose child benefit and pay a huge amount of tax I am considering changing my contribution for this year to 50% of basic to bring salary back down to the 50k mark

Would this be sensible or a step too far?

bigadaj

Sensible I woudk have thought. Really sensible would be to salry sacrifice even more and continue to get nearly half your pension contributions paid by the government, and a third even if you go below the higher rate tax threshold.

haras_nosirrah

Still got a mortgage to pay and a family to support so can't go too crazy with it. My commission goes up through the year when you hit certain levels so should increase substantially and then drop down in jan (I.e will finish the year on 34% commission but it will reduce back to 5% in jan) so would probably need to drop the contribution again.

greenglide

... and under normal circumstances the number of times you can change the sacrifice amounts is limited. There are HMRC rules over this and my employers only allow the initial annual selection, an option to change pension options in April and significant life events only. You need to consult your scheme documentation.

haras_nosirrah

Hadn't considered that. Tried to phone pension provider and they said to speak to employer so have emailed them. Are you allowed to do a lump sum at end of tax year with yours?

Lokolo

You could open up a pension elsewhere and deposit into that. You won't get the salary sac. benefits (saving NI contributions), but you will still get tax relief and child benefit.

greenglide

Are you allowed to do a lump sum at end of tax year with yours?

No I can't. All salary sacrifice is by monthly amounts with no lump sums. I am allowed to pay in lump sums but these must be by deduction from salary, not salary sacrifice.

I think this is pretty standard as one off payments are seen by HMRC as being ways of avoiding NI whereas salary sacrifice isnt (very odd to me though!)

rpc

Lokolo wrote: »

You could open up a pension elsewhere and deposit into that. You won't get the salary sac. benefits (saving NI contributions), but you will still get tax relief and child benefit.

And the NI saving in the 40% band is not terribly much unless the employer gives you theirs, so little is lost by using a personal pension instead.

edit: approximately. it's the UEL that matters which is 41860 this year

haras_nosirrah

So if I set up and paid into a seperate pension could I amend or stop my payments through the year at all or would I be committed to a certain amount of money a month?

How does it work with the tax - would I get a rebate on my annual tax return?

Also would it affect things like maternity pay? With Salary sacrifice you get 90% of taxable pay for 6 weeks which is obvious reduced by pension. Would the same happen with a private pension?

xylophone

So if I set up and paid into a seperate pension could I amend or stop my payments through the year at all or would I be committed to a certain amount of money a month?

In these circumstances a stakeholder might suit.

http://www.cavendishonline.co.uk/pensions/stakeholder-pensions/

Re tax relief http://www.hmrc.gov.uk/incometax/relief-pension.htm

"Personal pensions
You pay Income Tax on your earnings before any pension contribution, but the pension provider claims tax back from the government at the basic rate of 20%. In practice, this means that for every £80 you pay into your pension, you end up with £100 in your pension pot. If you pay tax at higher rate, you can claim the difference through your tax return or by telephoning or writing to HMRC. If you're an additional rate taxpayer you'll have to claim the difference through your tax return."

Daniel54

haras_nosirrah wrote: »

So if I set up and paid into a seperate pension could I amend or stop my payments through the year at all or would I be committed to a certain amount of money a month?

How does it work with the tax - would I get a rebate on my annual tax return?

Also would it affect things like maternity pay? With Salary sacrifice you get 90% of taxable pay for 6 weeks which is obvious reduced by pension. Would the same happen with a private pension?

Are you sure you can't make one off payments into your company pension.I contributed by sal sac but there was no obstacle to additionally making one off payments from my own resources