Salary sacrifice a large proportion of salary or not

haras_nosirrah

I am not sure. I have emailed hr to ask as pension people wouldn't answer my queries. It would certainly make it easier than trying to guess how much I was going to earn and trying to work out how much to contribute from there

haras_nosirrah

Have looked at the cavendish online link and I don't understand the charges

Is it better to to direct to friends life - what does the + figures mean?

jamesd

greenglide wrote: »

There are HMRC rules over this

Yes, there are. What they say is:

"Does HMRC require an employee to sign up for a salary sacrifice scheme for a set period of time, or can they opt in and out?
...
the following exempt benefits:
Employer provided childcare
Workplace parking
Employer provided cycles and cycle safety equipment
Employer made contributions under a registered pension scheme

In consequence, these benefits are exempt from income tax altogether. It is not necessary to stipulate a period for which the arrangement must be entered into or to set out 'lifestyle changes'."

For all of those things you can completely forget about any of the past HMRC requirements for significant life events. Those restrictions no longer apply.

What happened with pensions is auto-enrolment. The law governing auto-enrolment mandates employers offering the option to cancel at any time and at least one option to join each year. That law would have prohibited the use of salary sacrifice for pension contributions under the old restrictions. So from the summer of 2012 HMRC removed the restrictions for pensions.

greenglide wrote: »

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.

Your employer may just not have updated the scheme documentation or may simply choose not to allow you to have the complete freedom that HMRC now permits. If it matters to you ask them whether you can do a mid year change now that HMRC says it's fine to do that.

jamesd

One of the options my employer offers is to specify a percentage of variable pay that will be used for salary sacrifice pension contributions. Yours may do the same since your problem is not uncommon.

greenglide

Your employer may just not have updated the scheme documentation or may simply choose not to allow you to have the complete freedom that HMRC now permits.

It is an online system which only allows changes at the prescribed times. While they obviously "could" change it this would obviously depend on their relationship with the solution provider - it is not obvious whether the system provider is owned (all or in part) by my employer!

It is annoying that they award (or not, mostly) pay increases AFTER the sacrifice options have been selected and it is locked. Logic says that the level of pension payments (AVCs to the DB scheme, in my case) as a monetary amount is dependant on the salary for the year. You cannot specify this as a percentage.

I will ask the question but will not hold my breath!

jamesd

Mine normally allows only the prescribed times but on request they can open it up again for a specific person. It's how they handle the life events but they have also said for example that they will do it to adjust fine tuning for eliminating higher rate tax liability part way through the year. I quoted them the change details when I asked about that, since then it was a fairly recent change.

Really up to them to decide what they will allow but it's no longer due to current HMRC restrictions.

ukjoel

Ours used to be fairly rigid but I think the rules or guidance changed last year and we are now allowed to change as often as we like in terms of salary sacrifice.

Like you I am in a heavy bonus related role and that bonus means the difference between coming in at the 20% level or the 40% level or the 40% level plus loss of child benefit (for 3 kids).

Previously I have always had to predict (and luckily have been pretty accurate) but now I am able to pay in percentage of salary via salary sacrifice and then also a percentage of bonus.

HR may be scared of lots of changes so maybe ask for 4 change windows a year and then they wont panic.

Snakey

If you can make lumps via salary sacrifice, be careful about leaving it until the end of the tax year before doing the maths because if Payroll mess up the admin and it doesn't go through properly in March then you can't make the contribution in April and backdate it.

Found this out the hard way (although not such a big deal for me as my issue was purely to do with hitting the (then) £50k limit and you do get a carry-forward with that).