Need advice on Salary Sacrifice Schemes

Camster

Hi,


My employer has recently announced plans to introduce a salary sacrifice scheme later this year in which all staff who are in the current pension scheme will be automatically enrolled in, unless they choose to opt out.

As part of the process, they have produced a guidance leaflet that gives the pros and cons of the scheme. From what I can see there are many more pros than cons, but I wanted to ask if there are any pitfalls that I should be aware of before deciding if I should join or opt out of the scheme.


Thanks,


Tom

atush

I cant think of any. Most mtgs would be off your gross salary before pension- if not that would be the only con.

Saving 32% tax if you pay Basic rate tax is pretty great.

I would not opt out under any circumstances

somethingcorporate

Cannot see any reason to sign up to it, esp if you are a higher rate tax payer as saves you having to manually reclaim the additional tax.

WobblyDog

I'm a basic-rate tax payer in a salary sacrifice scheme, and saving the employee NI contributions is great.

The only negative I've experienced is that I can only change my contribution level once a year - I think the leglislation makes it difficult to change contributions more often.

zagfles

WobblyDog wrote: »

I'm a basic-rate tax payer in a salary sacrifice scheme, and saving the employee NI contributions is great.

The only negative I've experienced is that I can only change my contribution level once a year - I think the leglislation makes it difficult to change contributions more often.

This used to be the case but isn't any more - although a lot of schemes haven't caught up. Or they use sal sac for other things as well, I think the annual change rules still applies to most other things, so they apply it to pensions too, to simplify things.

zagfles

somethingcorporate wrote: »

Cannot see any reason to sign up to it, esp if you are a higher rate tax payer as saves you having to manually reclaim the additional tax.

Pension conts are still usually taken before tax even if sal sac isn't used. But not always!

Snakey

The main reason not to is if you're planning to apply for a mortgage as most lenders will only look at your new, lower, salary.

(Then again, I bought just before they changed the rules about affordability and so on - it may be that it's all swings and roundabouts nowadays.)

Other reasons revolve around statutory benefits and payments, as some are calculated based on your salary and so anything that makes your salary look lower will affect them.

If you aren't concerned about any of that, and a lot of the time you won't be, then I'd go for it - it's the most tax-efficient way to save short of having somebody else pay it all for you.

Camster

I don't think the mortgage application would be an issue, as they have said they would use what they are calling a "reference salary figure" for confirming income, which would be your salary as if the salary sacrifice wasn't in place.

I'm not planning to apply for a mortgage, but I hope this approach is legitimate in case I do in the future.

taktikback

My salary sacrifice scheme allows monthly changes to pension contributions so it's definately not restricted to yearly due to legislation - only local rules

Snakey

The mortgage application I made wanted to see payslips, they didn't ask for a letter from my employer.

You can always stop making payments for a few months before making the application, anyway.

somethingcorporate

Snakey wrote: »

The main reason not to is if you're planning to apply for a mortgage as most lenders will only look at your new, lower, salary.

(Then again, I bought just before they changed the rules about affordability and so on - it may be that it's all swings and roundabouts nowadays.)

Other reasons revolve around statutory benefits and payments, as some are calculated based on your salary and so anything that makes your salary look lower will affect them.

If you aren't concerned about any of that, and a lot of the time you won't be, then I'd go for it - it's the most tax-efficient way to save short of having somebody else pay it all for you.

The first reason depends on the lender. The letter from my employer stated my pre-sacrificed salary (and my payslip shows both).

The second is legitimate and you can use salary sacrifice to access certain benefits (e.g. child benefit).