Need advice on Salary Sacrifice Schemes

Camster

Is there any quick way to estimate how much more I would receive if I took up this option as a basic rate taxpayer.

webnibbler

The basic calculation would simply be the percentage of your salary being sacrificed plus the percentage of contribution from your employer. For example 10% from you and 5% from your employer. This is all before tax so there is no need to take income tax into consideration.

Then there is also the National Insurance savings made by your employer. This is currently 13.8% of your contribution through salary sacrifice. Some employers will pass all of this saving on to you, others may only pass on a percentage of it or keep it all for themselves. It's worth finding out how much of the NI savings are passed on to you.

If you receive all of the NI savings, then the calculation is, for example - (10% from you + 13.8% of the contribution) + 5% from your employer.

bigadaj

webnibbler wrote: »

The basic calculation would simply be the percentage of your salary being sacrificed plus the percentage of contribution from your employer. For example 10% from you and 5% from your employer. This is all before tax so there is no need to take income tax into consideration.

Then there is also the National Insurance savings made by your employer. This is currently 13.8% of your contribution through salary sacrifice. Some employers will pass all of this saving on to you, others may only pass on a percentage of it or keep it all for themselves. It's worth finding out how much of the NI savings are passed on to you.

If you receive all of the NI savings, then the calculation is, for example - (10% from you + 13.8% of the contribution) + 5% from your employer.

This answer misses out the main advantage with salary sacrifice which is the saving in employee national insurance. Contributions are before tax, but so are most employer schemes, and with salary sacrifice you get primarily the employee element included, which is 12% for a standard rate taxpayer and 2% for a higher rate taxpayer.

Employer ni contribution can be anything firm zero to the full amount so you'd have to ask your company what they plan to do.

atush

So, you will get 32% in tax relief from YOUR contributions, plus your employer contributions. And you can ask if they will refund some of their NI savings too- some do and some dont.

Salary sacrifice is an excellent pension to have so grab it with both hands and put in as much as you can.

Thrugelmir

taktikback wrote: »

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

Then you'd need appropriate documentation issued every month. As the changes are contractual. If the changes are not specified then existing terms remain valid.

Camster

There has been no mention in the literature they have issued about sharing any NI savings they make, so I am assuming they will be keeping the whole amount saved themselves, although I will confirm this point with them.

At the moment I'm paying £308 per month in pension contribution and £306 National insurance, so assuming my employer doesn't share any of their NI savings, I would save:

10% on the amount paid in pension contributions = £30.80 plus 12% of the NI contributions = £36.72, making a total monthly saving of £67.52.

Does this sound about right?