Workplace pension/Salary sacrifice

HustleGang

Hi all,

I've been a member of my workplace pension since May 2016, In have only just started to research and learn about finance and how all this stuff works.

I have a few questions if you don't mind:

1. In have only made one contribution to my pension which was 55p, in May 2016, which baffled me as I assumed they took a percentage from my gross pay, I assume this means I'm part of the salary sacrfice scheme?

2. "SMART ss work ee" or something similar comes up on my pay slip, is this the same for all pension contributions or does the AS denote it's specifically for salary sacrifice?

3. Is it possible to opt out of the salary sacrifice scheme without losing the contribution which my employer matches?

PeacefulWaters

On (3) why wouldn't you want to pay by salary sacrifice?

HustleGang

I was under the impression that using salary sacrifice lowers national insurance contributions, meaning you'll have to top up your NI payments to receive full state pension ( if it still exists then)

Also apologies as I've posted the same thread twice.

elsien

HustleGang wrote: »

I was under the impression that using salary sacrifice lowers national insurance contributions, meaning you'll have to top up your NI payments to receive full state pension ( if it still exists then)

Also apologies as I've posted the same thread twice.

Depends on the figures and what you earn. In my company, if it means you go below the threshold to lower NI payments, they won't agree it. It's specifically planned to avoid that happening.

HustleGang

Thanks above user.

Does anyone know how they work out a reduced salary when your on a hourly rate and paid weekly with varying income each week (bus driver)?

I assume whatever the weeks gross pay is they'll take the % from that?

jamesd

HustleGang wrote: »

I was under the impression that using salary sacrifice lowers national insurance contributions, meaning you'll have to top up your NI payments to receive full state pension

It doesn't have that effect. Since April 2016 the state pension is built up by a fixed amount each year. The former partly earnings-related increases no longer happen. Because it only takes 35 years to reach the state pension cap in the new system most people will end up with that cap level, whether it's from working or credits like the ones a recipient of child benefit or job seeking or unable to work benefits.

There are some working age benefits that are reduced a bit but it's an excellent deal.

kev2009

I didn't think it affected NI,my understanding was you get paid x a month, they subtract the salary sacrifice payment from the gross and then on this figure tax you accordingly, therefore it's as if you are earning less. This has advantages if you are in a high tax band as if you pay your pension by salary sacrifice, you end up paying tax at a normal rate as your salary sacrifice brings you below the higher tax band. If only i was in that position would be great!

Kev

bluenose1

I found the following site the best way to work out what difference % pension contributions make to take home pay.
Input your salary details and then click on the pensions tab and put in the % of pension contributions you are thinking of making. In the same tab click on salary sacrifice and it shows you that you will get more salary if you opt for SS, yet doesn’t reduce your pension contributions.

https://www.thesalarycalculator.co.uk/salary.php

HustleGang

Thanks all for the responses, much appreciated.

Another silly question, my fund has increased by a personal rate of return of 10.52%

If I have £100 And rate of return is for example 10% then I now have £110, when is the £110 reinvested again and calculated?

Is it the same as interest rates?

jamesd

Just like compound interest. The money inside the funds is invested for you or the gain is in shares or other things that the funds already own. The values you see are the current value of everything owned.