Salary sacrifice - is this a good idea for me

Zorillo

Getting the maximum contribution from their employer is the minimum anyone should aim to do.

A basic rate tax payer hoping to retire at 50 needs to contribute massively more than that, assuming they are aiming to be self sufficient and not rely on a partners income or inheritance.

kev2009

My work pension is 65 as that was my state retirement age at that time but it the state pension age for me has since increased but work pension hasn't. I presume i will just continue working till state pension age if i wanted to as now a days you don't have to retire. Ideally i want to go at 65 or maybe a bit before if the figures add up, fingers crossed.

Kev

swindiff

What is the interest rate on your mortgage, 2-3%?
It will cost you £68 for every £100 that goes into your pension with SS, that's a 47% increase.
For this reason pension is a priority over mortgage over-payments for me.

MEM62

kaycastle wrote: »

That is changing to employees doing 2% to get up to the required 8%.

kaycastle wrote: »

I'm in my late 20s and have dreams of retiring early.

A dream is all is will be unless you are contributing considerably more than 8%. That is nowhere near enough for early retirement.

On the plus side salary sacrifice is a very good scheme. Take full advantage of it.

bluenose1

crv1963 wrote: »

I would look at your pension scheme retirement age, if it is to be taken at the same time as the state pension then you may have to plan alternative savings types to be able to go before then.

Decide when/ what age you are aiming for. There are SIPPs, PPs which currently are able to be taken at 55 soon to be up to 10 years before SPA, there are Lifetime ISA (LISA) that can only be opened by the under 40s and accessed at 60, or ISA which can be taken whenever you like.

For us the SIPP is the first choice because of the immediate up lift from the 20% HMRC puts in and the relatively short time scale for Mrs CRV to access it. For me it is ISA as I already will be a basic rate tax payer in retirement, so any income from the ISA will be tax free for me.

There are advantages with all depending how old you are and where on your journey you are. Whichever you use be safe in the knowledge money saved now is money you do not need to earn later.

So probably a mix of different tax wrappers would be good, a lot will change over the time until you are looking to stop work, the more you have put away the less time you may need to work.

Good luck.

We too are throwing everything into my pension scheme so I can retire in 2 years 3 months at 55. I am contributing the max work pension D.C. allowed to keep me above NMW.
I am a basic rate tax payer and use my full personal allowance on salary and property income, this will be used by DB Pension and property income from 55.

I have approx £300 per month excess and was thinking of putting it in a SIPP as although I would pay 20% tax I would still have 6.25% profit on my initial outlay. Curious as to why as a basic rate tax payer an ISA is better for you than a SIPP, just wondering what I am missing.
My sums are
£800 put in SIPP is topped up to £1000 and even paying full tax I can withdraw £850.
£800 put in ISA, wont pay tax so can withdraw £800.

swindiff

Any growth in an ISA is tax free. Growth in a SIPP would be taxable after the initial 25% tax free element.

Anonymous101

MEM62 wrote: »

A dream is all is will be unless you are contributing considerably more than 8%. That is nowhere near enough for early retirement.

On the plus side salary sacrifice is a very good scheme. Take full advantage of it.

Agreed. It of course depends on just how early you mean but a lot of the F.I.R.E. people aim for a 50% savings rate as a rule of thumb. Some of them are way way over that.

Clive_Woody

kaycastle wrote: »

I agree with the rest of you, I can't imagine working past 50, let alone 60. And I'm not even 30 yet. I work hard but I work to live and I get fulfilment from hobbies and family rather than a specific career goal.

I admit I had to Google "sipp" so that's like your own personal pension that you do outside of work and everything. I haven't started a sipp or anything. I'm guessing first I should max out at workplace pension to try to get an increased contribution from employer.

To add to the fun and games it might also be worth looking at AVCs to see if this something that could work for you (or is even offered).

With my employer I contribute 7% and they contribute 10% in my DC pension. I can additionally make AVCs by salary sacrifice and my employer also adds the 13% NI saving they make to the contribution.

kaycastle

You are all giving me lots of work to do haha I had a catch up with work today and I can increase my salary sacrifice which I will do. I did raise the ni savings of the company but there are unfortunately no plans for the company to increase their contribution. No surprises there! I can raise concerns with other employees to try to get that changed for the future but no immediate movement on that to year I think.

crv1963

bluenose1 wrote: »

Curious as to why as a basic rate tax payer an ISA is better for you than a SIPP, just wondering what I am missing.

My reckoning, which may be misplaced; is that I would pay tax on any draw down from a SIPP in my name; with an ISA I wouldn't. It may be useful to put the 2880 pa into a SIPP for me for long term use in my dotage- invested for long term growth. Mrs CRV SIPP is a no brainer as it will be drawn up to the annual personal allowance.