Salary sacrifice v personal pension (for higher earners)

Albermarle

as my workplace pension the fund choices are limited  and also have high charges

Normally workplace pensions are competitively priced, but often this is through a discount on the standard fund costs.

This discount is often not very visible/obvious , so worth checking with your employer/provider.

MaxiRobriguez

Albermarle said:

as my workplace pension the fund choices are limited  and also have high charges

Normally workplace pensions are competitively priced, but often this is through a discount on the standard fund costs.

This discount is often not very visible/obvious , so worth checking with your employer/provider.

To extend on this, it's probably worth sacrificing at least enough to get you under higher rate tax, if not more still. You get the benefit of keeping the 42% tax that you would otherwise have lost, and it may come with additional perks that only basic rate tax payers get. If that impacts too much on cash flow, then you could potentially free up some money by extending mortgage or reducing monthly payments. Whilst you'd pay more in the long run that way, it'll be more than covered when you come to access your pension.

It requires a fair bit of planning but can be done. I'm in a similar boat as you, sacrificing c40% of my annual salary and down into basic rate taxpayer doing this. Don't have a lot to live off at the end of the month and use an offset mortgage for emergencies. It's a bit too thrifty for some but my projections see me get to £500k in pension by 45. Worth it, and will just need to watch out for lifetime limits then!

perky29

Thanks.  I'm currently sacrificing quite a lot (30%) - plus the employer contributions - to try and get me to a place where i can think about other options potentially at 50 - some 11 years off at the moment.  Certainly making the most of salary sacrifice and NI savings (which my employer does pass on).  The scheme charges are good I think (0.4%), so my plan is to keep things going as they are, plus trying to save into S&S ISAs too in case i do want to take a leap at 50.  Not planning to be able to access any pension until 58.  

MaxiRobriguez

Sounds like you're well on top of it then. Best of luck with the early(ish) retirement!

house_help

Young_worker said:

house_help said:

I am in same boat. I do put some additional into personal pension as my workplace pension the fund choices are limited  and also have high charges so I have DIY PP to invest in things not covered by work scheme. My workplace do not however pass over the NI saving they make so the delta for me is not so much.

Not sure if its an option for you but one thing to consider is salary sacrificing into your workplace pension to get the NI saving and every so often doing a partial transfer of funds to your DIY PP to get the wider investment choice. Bit of a faff and you are out of the market for a few days but does give potential to get best of both worlds if its allowed by both your schemes. 

Will check that thanks. The SS NI saving has only just been brought in by employer last month so previously the extra NI saving was not there.