Salary Sacrifice - A no brainer?

Anonymous101

vacheron wrote: »

I'm aged in the middle (44) so and have the same concerns regarding short term cash.

• I'm currently using my pension (via salary sacrifice) as the majority of my long term (10 years+) investments.
  
• I have a few shares held outside the pension for medium term (5-10 years) investments.
  
• I have kept my offset mortgage reserve accounts open for most of my cash savings for short term liquidity (0-5 years).

My current plan when retirement approaches (i'm aiming for 58 and providing I am still working) would be to "draw down" the offset mortgage reserve and use it for daily spending which will allow me to simultaneously sacrifice almost my entire salary into my pension (with a resultant tax saving, 8% employer contribution and 13.8% employer NI bonus.

When retirement arrives I will then use the lump sum from the pension to settle any resultant mortgage reserve shortfall and bag the rest.

:cool:
I think that's a reasonable strategy. Have you worked out how much you'll need to get you to retirement? At 44 if you're relatively cash rich it could be worth adding a few % addition AVC's into the pension earlier?

I intend to do similar once I get near enough to my numbers. I work in a fairly changeable industry that goes through periods of boom and bust. Depending on where it is within this cycle, life can be much more or less stressful. If the time arrives and we're in a good period, as now, I'd happily work on for a year or two and add really add some cream to my retirement.

As I move from my position now to yours and then closer to retirement I'd likely ramp up my pension savings. I know that you're not quite getting the full benefit of compounding on your gross amount but the risks are higher as you are younger. As I said before there's always therefore a balance between putting "enough" into your pension and keeping sufficient back.