Salary sacrifice car scheme and the future pension

MoDo

Information from the leaflet:

Will Salary Sacrifice affect my Local Government pension?

The LGPS moves to a career average pension scheme on the 1st April 2014. Pensionable pay for membership to 31st March 2014 will be based on your final salary when you retire and from 1st April 2014 based on your service and earnings for each individual year i.e. actual earnings including payments received such as overtime instead of your annual contractual salary at present. The pension accrued for each year will then be revalued to take into account inflation in line with the Consumer Prices Index (CPI).

The new accrual rate of 1/49th means if you have sacrificed £3,000 a year from your salary your annual pension, before stoppages for tax, will reduce by £61.23 i.e. £5.10 per month. However, as on average the savings made on a car leased under the scheme are £85 per month the loss in pension in the future is partially, if not totally, offset by the savings in your pocket now. Additionally you could offset the future reduction of pension by taking out an Additional Voluntary Contribution contract (AVC) and still make great savings by participating in the scheme.

It is recommended that you seek advice from an independent financial advisor.

Hi there, has anybody experience with that? I understand that if I sacrificed £3000 from my gross wage for a company car for 1 year, I would lose £5 a month from my pension during the whole time I am a pensioner. If you are a pensioner for over 20 years, it can make quite a lot of money (£5 x 12 months x 20 years = £1200) compared to what you save on taxes or national insurance now (just for 1 single year). If I was sacrificing the salary while I am working (e.g. 30 years) in order to have a company car, I could lose about £150 from my future monthly pension.

My question is: Do you know a good calculator, where I could find, how much I would have to boost my pension contributions in order to get the same amount as in the case without sacrificing?

The thing is that I could have a brand new and well equipped little city car for about £2,500 gross sacrifice, what means that I would lose just about £160 from my net monthly wage. Car would be insured, taxed, maintained, etc (just like having dad's or mum's car ). But as the LGPS pension is calculated as 1/49 of your complete full gross salary from all years that you have worked, my final sum would be 30 years x £2,500 = £75,000 less. It means that my annual pension pot would be £75,000 / 49 = £1530 lower. Roughly £127 lower monthly pension.

I would like to have a car for £160 a month, but I don't want to lose my future pension. Is there a way how to find the best solution?

Thanks a lot in advance. I would appreciate a response from somebody who's got a good knowledge of this.