AVC or LISA ?

Cmdr_Bond

Right, time to explode my head with some more maths...

Without Salary Sacrifice, for the agreed pension I get £1.25 for every £1.00 I put in PLUS £2.50 from the company (assuming they are getting corporation tax relief and passing it on). = £3.75 for every £1.00

For the AVCs I simply get the £1.25 per £1.00


With Salary Sacrifice, the agreed pension increases to £1.47 per £1.00 (assuming all going into pension and not back into wages). And assuming the company also passes on the NI savings (13.8% for employer contributions) £3.02 from the company. = £4.49 per £1.00

Have I got this wrong, should the 13.8% be applied to my contribution, not the companies?
If so that increases my savings to £1.84 per £1.00 and leaves the company contribution at £2.50. = £4.34 per £1.00

The extra bonus could be with the AVCs - IF the company allows AVCs to be part of the sacrifice AND a passes on their tax reliefs. Especially if the 13.8% is applied to my contributions. Then as above, that means my AVCs would be worth £1.84 per £1.00.

Does that sound right? Because if it does, it makes SS a VERY interesting option.

kidmugsy

Cmdr_Bond wrote: »

Without Salary Sacrifice, for the agreed pension I get £1.25 for every £1.00 I put in PLUS £2.50 from the company (assuming they are getting corporation tax relief and passing it on). = £3.75 for every £1.00

Corporation tax is none of your business. Even if the firm made a loss and paid no CT, if it's promised to double-match your £1.25 then it will (unless you work for a bunch of crooks).

Cmdr_Bond wrote: »

With Salary Sacrifice, the agreed pension increases to £1.47 per £1.00 (assuming all going into pension and not back into wages).

And assuming the company also passes on the NI savings (13.8% for employer contributions) £3.02 from the company. = £4.49 per £1.00

"assuming": why all this "assuming"?

Cmdr_Bond wrote: »

Have I got this wrong, should the 13.8% be applied to my contribution, not the companies?

Under sal sac YOU don't make a contribution. You sacrifice some salary and your employer makes a contribution on your behalf.

Cmdr_Bond wrote: »

it makes SS a VERY interesting option.

Of course it ruddy does: see my early post. But more importantly, read the rules of your scheme.

Cmdr_Bond

So the entire contribution is made with 33.8% tax relief then (assuming, YES assuming) all the relief the company gets get out into the pension AND applies to AVCs asking with the basic agreed amount).

As for checking the rules, I can't.

Because the company hadn't made a decision whether they are going to do it or not.

I only found out yesterday after checking with them (because of this thread) that they're considering it.

If it happens, it should be in by September

cloud_dog

In trying to obtain specific figure, benefit, I think you are just over complicating your decision making process.

If you can make additional pension contributions (be they AVC or increased DC cons) via SS then it is to your financial advantage to do so. Whether the advantage is 2%, 6%, 12%, or 13.8% is almost irrelevant; it is to your benefit, what else do you need to know?

EDIT: If your company allows one-off or single type contributions in to a AVC/DC pot then you would benefit (financially) even more so by making a single payment (but I don't want to get you sidetracked). This is because whilst tax is based on the year (an 'average' payment) NI deductions are based solely on what is being paid.

Dandytf

kidmugsy wrote: »

If your pension lets you contribute by salary sacrifice the AVC will be more profitable than the LISA.

I've recently gone +5% AVC from employers DC salary sacrifice pension
In addition to 5% matched upto 10% contributions.