Maths question: Basic Rate Sal Sac with employers NI contribution above annual allowance

michaels

Does it make sense to sal sac over the annual allowance for a basic rate taxpayer if you also benefit from 10% of the employer NI saving and will pay basic rate in drawdown?
£100 sal sac plus 10% employer ni = £110 less 20% AA charge = £88 less 15% income tax on drawdown = £74.80
£100 less 20% income tax less 12%NI = £68
Is this correct?

Andrew31

I'm often interested why someone would questions like these? 
If real world, give us the real figures.  

zagfles

Looks right, but if doing it long term then the LTA will very likely become an issue which would definitely tilt the equation the other way. 

ETA: actually the above assumes scheme pays, and so criteria have to be met - google "annual allowance charge scheme pays".  Without scheme pays, the £22 would come off post tax income not pre-tax, it would still seem beneficial, but only just (£71.50 vs £68)

michaels

Andrew31 said:

I'm often interested why someone would questions like these? 
If real world, give us the real figures.  

It could be someone close to retirement (so tying up funds wouldn't matter) and might be used to move savings currently not in a pension into a pension by living off savings while contributing all income down to national minimum wage, making a small 'profit' on the turn.

Andrew31

So its just a hypothetical.