We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

Pensions and salary sacrifice

Had an e-mail from Motley Fool today suggesting that using the salary sacrifice scheme you can make additional contributions to a pension and still come home with the same amount of money (oh and apparently some employers will pay the NI they save into your scheme). Has anyone done this and do you know if LGPS or TSP will accept this type of contribution?
;) If you think you are too small to make a difference, try getting in bed with a mosquito!

Comments

  • Techno
    Techno Posts: 1,169 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    Anyone used salary sacrifice for pension?
    ;) If you think you are too small to make a difference, try getting in bed with a mosquito!
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    There's a "sticky" thread at the top of the forum on this.
    Trying to keep it simple...;)
  • Techno
    Techno Posts: 1,169 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    Thanks Ed - thought it was something new but Motley Fool must be copying eh!!
    ;) If you think you are too small to make a difference, try getting in bed with a mosquito!
  • Andy_L
    Andy_L Posts: 12,958 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Public sector pensions will not do this as a saving in NI is not a real cash saving to them, just a circular transfer of money from government budget to budget.

    Although if they were to transfer you to a defined benefit scheme, even with salary sacrifice, that might be cheaper than the defined benefit scheme they provide
  • dunstonh
    dunstonh Posts: 118,549 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Thanks Ed - thought it was something new but Motley Fool must be copying eh!!

    I think I did my first salary sacrifice back in 1995. Advisers have been recommending it for decades.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • dunstonh wrote: »
    I think I did my first salary sacrifice back in 1995. Advisers have been recommending it for decades.

    I must be much, much older than you then .... as they were around in the 70s! :eek: :eek: :eek:
    Warning ..... I'm a peri-menopausal axe-wielding maniac ;)
  • Techno wrote: »
    Had an e-mail from Motley Fool today suggesting that using the salary sacrifice scheme you can make additional contributions to a pension and still come home with the same amount of money (oh and apparently some employers will pay the NI they save into your scheme). Has anyone done this and do you know if LGPS or TSP will accept this type of contribution?

    Let me help you understand the concept of salary sacrifice, even though your employer is highly unlikely to operate it.
    using the salary sacrifice scheme you can make additional contributions to a pension

    Salary sacrifice is a pay cut. Let's say you agree to a pay cut of £100 per month. You get paid less! As you are not receiving the £100 per month you used to get, you don't pay tax and NI on amounts you haven't received. So ... you get paid less and directly as a result of that, you pay less tax & less NI.

    In exchange for this pay cut, your employer pays £100 each month into the pension scheme.

    The value of the pay and benefits from your employer is your lower salary (i.e. minus £100) plus a pension contribution of £100. Total is the same as it was, before you took the pay cut - just that it's being paid in different ways.

    Yes - some employers pay more than £100 to reflect the fact that they would pay NI if it were paid as salary, but they pay no NI on contributions to pension schemes.

    HTH
    Warning ..... I'm a peri-menopausal axe-wielding maniac ;)
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 348.2K Banking & Borrowing
  • 252.1K Reduce Debt & Boost Income
  • 452.4K Spending & Discounts
  • 240.8K Work, Benefits & Business
  • 617K Mortgages, Homes & Bills
  • 175.6K Life & Family
  • 254K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.