Childcare vouchers - to continue with salary sacrifice from April in NHS?

Legacy_user

Just currently mulling over what to do regarding childcare vouchers...

Work in the NHS and am a basic rate taxpayer. I currently use salary sacrifice for childcare vouchers and sacrifice the full £243/month (wife also in NHS and sacrifices a smaller amount to cover childcare fees).

Obviously the NHS pension changes in April to the career average version. Therefore if I understand correctly, continuing to salary sacrifice will affect pension by reducing pensionable pay?

The government scheme starts next Autumn and I am therefore wondering if to continue to stay in employer scheme or move to the government one.

Obviously in the employer scheme I save tax + NI, so save 32%, but in the government scheme I will save tax only @20%.
However of course by stopping salary sac and moving government scheme I will increase pensionable pay and ultimately end up with a better pension.

What I cant work out is how much of a difference to pension it will actually make and am I better off pocketing the extra 12% savings now. My gut feeling tells me that the difference in pension is going to be negligible and that I am better off sticking with the vouchers. I have tried playing about with the NHS pension calculator, but doesn't really allow for this sort of calculation as is obviously very short term. Any help appreciated, thanks.

greenglide

What "government scheme" are you talking about? If you have confused the auto enrollment that "normal" workers will get if a "proper" pension scheme is not available then this is not available to an NHS employee and it is of no value.

You are already one of the best schemes around, you cannot do any better.

The salary sacrifice scheme reduces your salary for tax and NI purposes but does not reduce your pensionable pay.

Whoever has put this idea into your head please ignore them.

PeacefulWaters

greenglide wrote: »

The salary sacrifice scheme reduces your salary for tax and NI purposes but does not reduce your pensionable pay.

Whoever has put this idea into your head please ignore them.

It's probably worth checking. The paragraph below is based on current arrangements. I'd assume there could be a detrimental impact once the pension scheme changes.

Because of what appears to be a poorly designed salary sacrifice arrangement (or a deliberate attempt to reduce pension costs) staff might be best avoiding anything salary sacrifice other than pensions.

Currently the NHS pension scheme is a ‘final salary’ scheme and is based on the best year of the last three years you are a member of the pension scheme. Provided you are not taking a childcare voucher in the last year you are a member of the pension scheme, the fact that you have taken a childcare voucher previously will not affect your pension in the long term. You need to be aware that if you are unfortunate enough to die in service or to be made redundant and you have taken a childcare voucher for the previous three years the benefits which you or your dependents will receive will be reduced. If you have any concerns about this you should contact the Trust’s Pensions Adviser.

System

greenglide wrote: »

What "government scheme" are you talking about? If you have confused the auto enrollment that "normal" workers will get if a "proper" pension scheme is not available then this is not available to an NHS employee and it is of no value.

Sorry my fault - didnt explain myself very well, when I said 'government scheme' I was referring to the new childcare payment scheme the government are introducing next year. I know how good the NHS pension is even with the changes, so definitely no intention of leaving!

The salary sacrifice definitely does reduce pensionable pay. Currently we are still on final salary pension, so does not matter, but as of April we are all moved onto Career average pension, so it will matter from then. So I am trying to weigh up the benefit of salary sacrifice tax/NI savings for the next 5 or 6 years vs long term effect on pension.