Increase salary sacrifice - stop mortgage O/P's??

michaels

Making a virtue from necessity. Minimum wage means you can''t sal sac below the personal allowance if you work at least 4 days a week.

With tax credits and annual allowance factored in it can make sense to max pension payments every other year to 100% of earned income and earning more and saving to cover the low income year on the other year of each pair.

fifeken

michaels wrote: »

Minimum wage means you can''t sal sac below the personal allowance if you work at least 4 days a week.

The 4 days a week point is something I wasn't aware of and I wonder if I could work it to my advantage, as although I'm full time (36 hours per week) I do this over three shifts of 12 hours. Is the rule as simple as it sounds?

zagfles

fifeken wrote: »

The 4 days a week point is something I wasn't aware of and I wonder if I could work it to my advantage, as although I'm full time (36 hours per week) I do this over three shifts of 12 hours. Is the rule as simple as it sounds?

Course it isn't! Min wage is an hourly rate of £7.20 (for over 25's), you can't sal sac below that. So work more than 1527 hours a year and you'll earn at least the PA of £11k.

What "advantage" were you thinking of anyway?

fifeken

zagfles wrote: »

Course it isn't! Min wage is an hourly rate of £7.20 (for over 25's), you can't sal sac below that. So work more than 1527 hours a year and you'll earn at least the PA of £11k.

What "advantage" were you thinking of anyway?

I think from your response I may have misinterpreted the bit of post #12 that I quoted. When I read

Minimum wage means you can''t sal sac below the personal allowance if you work at least 4 days a week.

it made me think that if I work under 4 days a week I could salary sacrifice to below the minimum wage. I would like to do this for the tax and NI benefits and live off other funds. Looking at it again, along with your reply, I think I've read it wrong.

zagfles

fifeken wrote: »

I think from your response I may have misinterpreted the bit of post #12 that I quoted. When I read

it made me think that if I work under 4 days a week I could salary sacrifice to below the minimum wage. I would like to do this for the tax and NI benefits and live off other funds. Looking at it again, along with your reply, I think I've read it wrong.

Yes. There's no rule about days worked, it's just that PA/(NMW*52) = 29.38 so if you work more that number of hours a week you'll be over the PA. That happens to be about 4 days work assuming a average working day of around 7.5 hours.

fifeken

zagfles wrote: »

Yes. There's no rule about days worked . . . .

That's a shame, I had pound signs flashing in front of me when I read it.

somethingcorporate

You are already making huge pension contributions so personally I would go with crushing that mortgage like a boss - can always top up mortgage continuously through your lives, with the mortgage payment you will no longer have to make.

jamesd

Doing it that way around loses you money compared to the pension route because you lose so many years of compounded investment growth in the pension that you're unlikely ever to catch up to where you could have been. Optimal strategy is to get as much money as possible as early as possible into the pension, including doing things like using longer mortgage terms.

Some people prefer to be worse off and have the mortgage gone just because it makes them happier that way even if it is less financially beneficial.

BoxerfanUK

Thanks all for your input and replies so far, greatly appreciated.

I know I've been a little vague with my original post so I will try and reply a little later this evening or tomorrow and be more specific with regard to her current and previous earnings/pension contributions, plus what our actual aims and objectives are with regard to her pension pot.

Thanks again.

michaels

fifeken wrote: »

That's a shame, I had pound signs flashing in front of me when I read it.

It is swings and roundabouts below the pa anyway as although you lose the ni advantage of sal sac, if you make personal pension contributions you still get br tax releif even though you haven't actually paid any tax on the income.