Salary sacrifice and imminent retirement

BelindaDido

My OH is a lecturer at a university and a member of USS. His salary is paid via salary sacrifice but the uni does not share any of its NI savings with its employees.

In April 2015 (tax year 2015-6) my OH will be 65 and so will not have to pay NI. He hopes to continue to work for a few months beyond his 65th birthday.

When a previous version of salary sacrifice was available to me, I remember hearing that people approaching retirement should not join, but I didn't take much notice at the time as it wasn't immediately relevant to me. Does my OH need to reconsider being part of the salary sacrifice scheme since he is approaching his 65th birthday?

If he needs to opt out, should he do that now or wait until the beginning of the 2015-6 tax year?

Part of his salary is taxed at 40%, in case that is relevant.

Thrugelmir

BelindaDido wrote: »

My OH is a lecturer at a university and a member of USS. His salary is paid via salary sacrifice but the uni does not share any of its NI savings with its employees.

Employees themselves benefit from not paying NI contributions.

greenglide

and I can think of no disadvantage of remaining on a salary sacrifice scheme after reaching SPA. The fact that you no longer pay NI contributions seems irrelevant to me.

In my case I can't opt out of the scheme, it isn't optional but I don't have to take any of the benefits offered. The pension contributions are by sacrifice, if I still want to pay them they have to be by sacrifice. The employer gives no part of there NI savings but I get the savings of the reduction of the employees NI as all contributions, including the employees pensions contributions are technically employees contributions and the salary is reduced by the same amount.

Mrs_Soup

Isn't the USS a final salary pension scheme? If so what figure do they use for the final salary - the before salary sacrifice or after. If its the after then could it be worth stopping the salary sacrifice and going back to full salary as he would presumably no longer get teh gain from not paying NI once he doesn't have to pay.

My uni does the same with NI- the savings they make they apparently put into general staff welfare- yeh right!

greenglide

The normal procedure is to base the pension contributions and the pensionable salary on the gross amount before any sacrifice. Otherwise the system wouldn't work at all.

It is by no means uncommon for employers to retain the savings on employers NI. It is "reasonable" for them to take it into account when the level of employees pension contributions is set as this is generally the main or only saving of NI by sacrifice (it is the only benefit I get that gives a saving on NI).

BelindaDido

Thrugelmir wrote: »

Employees themselves benefit from not paying NI contributions.

Yes, I understand that, but as I mentioned my OH will cease paying NI contributions next April when he reaches the age of 65 so there will then be no benefit to him in remaining in the scheme.

Thank you, greenglide, for setting my mind at rest about there being no disadvantage in remaining in the scheme.

Mrs Soup, yes the USS is (was) a final salary scheme (new members have to join the career revalued benefits section). The documentation provided by the university when the scheme was introduced (2008) mentions 'Reference Salary' as the original salary before taking account of any USS Salary Exchange adjustment, and 'Revised Salary' to refer to the salary after the adjustment. Pensionable Salary is calculated based on Reference Salary, as greenglide mentioned.

So, although there will be no benefit in remaining in salary exchange, if there is no disadvantage in remaining then we'll probably leave things as they are.