NHS salary sacrifice into pension

sazdes

Morning!
Does anyone know if it is true that it is not possible to pay more money into an NHS pension out of your gross salary to reduce tax burden (as I am only a few hundred £ into 40% tax and am subsequently losing more than this in the tax on my savings interest), payroll have said this is universally not possible in the NHS but wasn't certain?

Many thanks

Spreadsheet_Addict

You could sign up to an AVC or buy additional pension, both of which are salary sacrifice and would push you back down into the 20% bracket.

https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension

Dazed_and_confused

In theory you can salary sacrifice down to minimum wage level but whether NHS/your employer will agree to this is another matter.

You could consider a personal pension/SIPP.

This has potential benefits of flexibility (can take in short space of time to bridge gap between early retirement, as in stopping/reducing work, and receiving your employer pension) and in addition to basic rate tax relief being added at source by the pension company you can also notify HMRC of the gross contribution and this increases the amount of your basic rate tax band.

Potentially saving you another 20/21% tax depending on how much higher rate tax you are paying and your country of residence for tax purposes. The extra tax benefit over and above the amount added by the pension company ends up with you, it's never added to the pension fund itself.

hugheskevi

The confusion is probably due to the use of the term salary sacrifice. If you use salary sacrifice you avoid employee and employer National Insurance contributions on the amount contributed to the pension.

Salary sacrifice is not used in public sector schemes, you just make normal pension contributions, and do not avoid any National Insurance on the contribution but do benefit from income tax relief.

You will also need to specify the amount (or percentage of salary) you wish to contribute, and to which type of additional pension option.

louloubelle79

I am not in the 40% bracket but I pay additional pension of £6500 max a year and AVC with Prudential, all salary sacrifice. There is also a NHS stakeholder pension.
https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension/additional-pension

greenglide

all salary sacrifice.

But NHS doesn't do salary sacrifice, does it?


Just because you get tax relief doesn't make it salary sacrifice.

sazdes

fab thanks, is there an advantage to AVC over buying additional years or vice versa?

Dox

Spreadsheet_Addict wrote: »

You could sign up to an AVC or buy additional pension, both of which are salary sacrifice and would push you back down into the 20% bracket.

https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension

Neither is salary sacrifice - the NHS doesn't offer the facility to members (it would cost too much in lost NI if they did!).

louloubelle79

Sorry if I don’t quite understand; although my additional pension payments and AVC all come out of my salary each month.

xylophone

Sorry if I don’t quite understand;

The NHS scheme uses "net pay"

which requires the scheme to take any contributions due from the employee from gross pay before tax. This means the employee’s taxable pay is lowered by the amount of their contribution, resulting in employees getting income tax relief at the highest rate that they pay.

Employer contributions are paid in addition and employees pay no tax on these contributions. National insurance is calculated on pay before pension contributions are taken so there is no impact to how much national insurance is paid unless the employer has chosen to use salary sacrifice.

The NHS does not use "salary sacrifice" in respect of pension contributions.

https://www.aegon.co.uk/support/faq/Understanding-our-products/retirement-products/workplace-pensions/what-is-salary-sacrifice.html

Spreadsheet_Addict

I think we are being a little pedantic here. Maybe if I make it clearer. You can buy additional pension and AVCs and the NHS will deduct it at source from salary and give tax relief. The OP will then not lose out due to being in the 40% tax bracket.