Salary sacrifice childcare vouchers - do they lower pensionable pay?

[Deleted User]

Wife works for NHS which has childcare voucher scheme. I get that if you do this you save by not having to pay tax or NI on the amount.

BUT, she doesnt earn enough to pay any tax/NI (works part-time) so theres no saving there.

She does pay NHS pension at 7.1%. But not sure if this 7.1% is applied to gross or after anything like childcare vouchers is taken out (i.e. it lowers pensionable pay). If so, I guess its 7.1% saving there.

One thing though, since NHS pension is a final salary scheme I guess its not wise to lower your pensionable pay in any way in the last few qualifying years because it will affect your final pension?

polgara

Just to note that the NHS Pension scheme is no longer a final salary scheme from 1 April 2015. Any contributions post 1 April 2015 are in the Career Average Revalued Earnings (CARE) scheme, with pre 1 April 2015 protected in the final salary scheme (1995 or 1998 scheme).

tomtontom

Great to hear wife is back at work after such a long period of absence. Wishing her well for the future.

[Deleted User]

tomtontom wrote: »

Great to hear wife is back at work after such a long period of absence. Wishing her well for the future.

Yes. She has been redeployed to a different department within the trust doing work which she is more able to do. Going well for now.

[Deleted User]

polgara wrote: »

Just to note that the NHS Pension scheme is no longer a final salary scheme from 1 April 2015. Any contributions post 1 April 2015 are in the Career Average Revalued Earnings (CARE) scheme, with pre 1 April 2015 protected in the final salary scheme (1995 or 1998 scheme).

Even for those who have been in the scheme for years? Or are you saying that before 2015 its protected but anything after you're forced into this?

Better read up about it then I suppose.....

polgara

Protected for pre April 2015 contributions (final salary) post April 2015 is career average. With potential for different retirement ages too.

[Deleted User]

polgara wrote: »

Protected for pre April 2015 contributions (final salary) post April 2015 is career average. With potential for different retirement ages too.

Always thought the last 3 years idea was a bit unfair though. After all before, couldn't you work part-time for 20-30 years (and not pay much in), then ram the hours in the last few years to get a bigger pension?

polgara

Not with working part time as it didn't accrue the same way but technically yes you could get a higher band in the last 3 years and benefit that way, however the NHS generally doesn't work that way. For instance it would be almost impossible to go from a Band 2 to a Band 8c for instance in your last 3 years.

Mupette

If no tax is paid on salary then she would not be earning enough for vouchers

[Deleted User]

Mupette wrote: »

If no tax is paid on salary then she would not be earning enough for vouchers

How do you work that out?

[Deleted User]

Mupette wrote: »

If no tax is paid on salary then she would not be earning enough for vouchers

I assume you base this on the fact that you can not go below minimum wage by taking vouchers.

However, I did say she worked part-time. 16 hours per week, in fact. If she did work full time and earn 10-11K then you have a point.

Think about it. I could work 1 hour a week and earn 4K per year. Then use up the max of £2900 on childcare vouchers. Still leaves me
with £1100. Still above minimum wage for the 52 hours a year I work.