Salary sacrifice?

chrisfreelander54

I have been with my current employer since march this year, which when I started I opted into the auto enrolment, a few weeks ago a pension adviser came into work to see all employees so I went along to see where my money is been invested.

I didn't have much to ask as not really up on pensions apart from I had one with my last employer with the same pension provider to which I made contributions of 5% and wanted to know if she could access it for me, which she couldn't but pointed me in the right direction.

Anyway, what I want know, is salary sacrifice a good thing and how does it work?

The reason I ask, is that I went to speak to my employer about upping my contributions, as I've missed out on loads over the years (I'm 38 and didn't start a pension until 2004 with last employer) so wanted to play catch up.

When mentioning this to my employer they said they would sort it when we return to work in the new year, I was also asked If would like to salary sacrifice, but seeing as this was the end of our last shift there wasn't much time to explain.

molerat

With salary sacrifice you do not pay anything into the pension, the employer pays it all and they reduce your salary to cover it. The benefit of this is that both you and the employer pay reduced NI, your tax is the same as with non salary sacrifice. Some employers will also give you some of their NI savings but they do not have to. The downside is that, on paper at least, you are on a lower salary which could affect benefits and your access to some financial products. https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/salary-sacrifice

xylophone

The downside is that, on paper at least, you are on a lower salary which could affect benefits and your access to some financial products.

See
https://www80.landg.com/DocumentLibraryWeb/Document?reference=cranswick_salary_sacrifice_booklet.pdf

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/salary-sacrifice-facts/

chrisfreelander54

molerat wrote: »

With salary sacrifice you do not pay anything into the pension, the employer pays it all and they reduce your salary to cover it. The benefit of this is that both you and the employer pay reduced NI, your tax is the same as with non salary sacrifice. Some employers will also give you some of their NI savings but they do not have to. The downside is that, on paper at least, you are on a lower salary which could affect benefits and your access to some financial products. https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/salary-sacrifice

So would the salary sacrifice be set at say 5% (think this what it is in total now, 3% me and 2% employer) and can I pay extra in if I want to to?

chrisfreelander54

xylophone wrote: »

See
https://www80.landg.com/DocumentLibraryWeb/Document?reference=cranswick_salary_sacrifice_booklet.pdf

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/salary-sacrifice-facts/

Links don't work.

xylophone

Links don't work.

Try typing Salary Sacrifice What is it Legal and General into Google.

And Prudential Salary Sacrifice the Facts.

kidmugsy

chrisfreelander54 wrote: »

Links don't work.

The Pru one worked for me just now, using the Safari browser. The other one didn't.

xylophone

The other one didn't.

No trouble getting it in Safari for me.

bluenose1

Without Salary Sacrifice if you are a basic rate tax payer every £80 you contribute to your pension gets increased to £100.
With salary sacrifice if you are a basic rate tax payer every £68 you contribute to your pension gets increased to £100.
If you change to salary sacrifice then all your current and any future pension deductions will be subject to the above.
The salary sacrifice will be set at the rate of your contribution. You will have to ask your employer if you can increase your personal contribution.

Dazed_and_confused

With salary sacrifice if you are a basic rate tax payer every £68 you contribute to your pension gets increased to £100

.

Are you sure about this? Salary sacrifice means you don't actually contribute anything into a pension. You are sacrificing salary so that your employer makes contributions into the pension scheme. As such no tax will relief will be added to the pension fund.

The tax relief benefits the individual not the pension fund, they have a smaller taxable salary and pay less tax as a result.

Still worth doing for a lot of people but it is wrong to say the pension contribution gets "increased".

zagfles

xylophone wrote: »

No trouble getting it in Safari for me.

Sometimes a space gets added to a long URL, that's what's happened here. Remove the space from the URL after clicking it and it works (space sometimes replaced by %20 in browsers)