Salary Sacrifice and company pension scheme

crisp

Hi, I am 46 and without a pension. I am single with no dependants.

I joined a company in June. its a small company with just an unpaid director. I currently earn £2,500 per month.

I understand that my salary now obliges the company to offer a pension and it has 3-months to implement this.

The director has asked me to look into the options for a company pension and speak with our payroll company.

Before I do that, I am interested in my broad options.

Can I set up my SIPP and make contributions from net pay, get my employer to contribute and reclaim 20% tax or must this be via some company scheme and a payroll company?

June has gone, but can a contribution be backdated?

I am keen to start one and get it right after years of proscrination.

MallyGirl

I'd avoid the term salary sacrifice as that has a very specific meaning.

Your employer might be prepared to contribute to a SIPP but you might lose out on any matching.

lisyloo

Salary sacrifice is a great way of doing things.
If your employer will agree to this, then there is at least one advantage and potentially a second.
The first advantage is that you won't pay employee NI on your payments to your pension. For a basic rate tax payer this is 12%.
The employer also normally has to pay 13.8% employers NI.
My employers passes this on to my pension in full which is great.

My last employer split the saving with me 50/50 which is still good.


So simple example.
Employer pays you £100.
If you take this as income employer pays £113.80, you pay £20 income tax and £12 national insurance and receive £68 in your pay packet.
If you pay pension payments from net pay and put £68 in your pension then the £20 income tax will also get put into your pension.
With salary sacrifice then somewhere between £100 and £113.80 will go into your pension.