Salary Sacrifice and NI benefit?

Smoothape

I have a pension which currently is setup to have employer only contributions. I opted out of doing salary sacrifice because I figured I would receive higher net income.

If I currently pay 150 in NI contributions a month but were to salary sacrifice 10% of my income each month say £250. (Doesn't have to be 10%. Just a hypothetical). How much would that offset NI contributions? Am I left with less each year in net income?

Is there a way to do salary sacrifice and offset NI to have the same net income and also benefit from the higher pension savings?

PeacefulWaters

Salary sacrifice for a basic rate taxpayer should mean every £250 of contributions only costs you 68% of that amount (20% tax, 12% NI). So £170 reduction in take home pay.

Not using salary sacrifice costs you £30 a month. Possibly more in your pension pot depending on employer NI handling.

davieg11

If you salary sacrifice £250 per month you would save 12% NI which is £30, so NI contributions would drop from £150 to £120. Your tax would also drop by £50 with 20% tax relief. So your net pay would reduce by £170 but you are saving £250 towards your retirement. Even saving 5% of your salary would only cost £85 but increase your pension by £125. Well worth it in the long run. Look at all your expenditures and cut back on £85 of luxuries like costa coffee and you will thank yourself in 25 years time!

marlot

Smoothape wrote: »

...
Is there a way to do salary sacrifice and offset NI to have the same net income and also benefit from the higher pension savings?

You need to make the choice between money now and money later.

As others have shown in the figures, the tax advantages of saving to a pension are considerable.

ermine

Smoothape wrote: »

Is there a way to do salary sacrifice and offset NI to have the same net income and also benefit from the higher pension savings?

No, because by definition you don't contribute at all at the moment To get any benefit you have to suck it up and do without now.

But if you do suck it up, then use salary sacrifice if are a basic rate taxpayer and you have the option. Use https://listentotaxman.com/ to compute how much you will have net, it's quite simple. Salary sacrifice is just that, so if you are SSing £250 pm then compare your net pay with original gross salary and run it again with your net pay with original gross salary - (12*250=3000). The £3000 extra goes into your pension

Smoothape

ermine wrote: »

No, because by definition you don't contribute at all at the moment To get any benefit you have to suck it up and do without now.

But if you do suck it up, then use salary sacrifice if are a basic rate taxpayer and you have the option. Use / to compute how much you will have net, it's quite simple. Salary sacrifice is just that, so if you are SSing £250 pm then compare your net pay with original gross salary and run it again with your net pay with original gross salary - (12*250=3000). The £3000 extra goes into your pension

My employer pays 200 on its own into a pension each month without salary sacrifice. It is a new employer and I am making significant changes this year such as moving into a more expensive rental as well as wanting to save money for a mortgage. I thought if I opted out of salary sacrifice my take home pay would be more but I'm still confused by it. At the moment having more take home pay is better for me because of the changes I am making.

I was told by my employer I can always opt in to salary sacrifice but my employer has said explicitly I cannot opt out once I am in. So I shouldn't opt in at the moment unless I can afford it for the long term.

I am a basic rate tax payer.