DB Scheme via Salary Sacrifice - Pension Input Amount?

cloud_dog

Hi
I'm unsure if anyone in my organisation would be able to answer this, and it probably wouldn't fall under the scheme administrators remit.

So for pension payments made under salary sacrifice for a DB scheme, would the PIA count as a company contribution (non-TR amount) or personal contribution (TR amount)? 

xylophone

Is this of interest?

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/how-to-use-our-annual-allowance-calculator-tool/

The amount sacrificed will become a gross employer contribution. Therefore the PIA will be accounted for as part of the employer contribution. However, you will need to find out if the employer is also passing on their National Insurance Contribution savings as a result of the reduced salary (it could be none, some or all).

Defined Benefit (DB) scheme

The PIA for a DB scheme is the difference between the capital value of pension and tax-free cash right at the start of the pension input period (the opening value) and the end of the pension input period (the closing value), not the contributions paid by the employee or their employer.

cloud_dog

It does indeed.  Was hoping there might have been a little more wiggle room for increasing the SS payments but, no. 

cloud_dog

This is a note for anyone who may be making use of the salary sacrifice and significant pension contributions within a DB/CARE scheme.

I noticed that on my PIA confirmation from my scheme administrators the 2018/19 PIA is £0.00.  The explanation is that the 2018 value (after CPI) is higher than it was in 2019 so the PIA is technically negative and therefore zero.  For me that means I could have (in theory) utilised more of the £40k allowance....if I had known.

Unfortunately the PIA calculation is always backwards looking so will only ever be confirmed after closure of the FY.  I'm hoping that someone who may have PIA calculation type knowledge might be able to offer any insights which may allow someone to make a reasonable assessment of ongoing PIA so as to see where they may be able to maximise.  

cloud_dog

Never fear...Royal London (and I assume other) have the answer to my question. 

I need to create a spreadsheet to cover my pension and the different accrual rates over the years.  Interestingly, for me any salary review occurs around the March timescale so I should be able to plug the numbers is and verify what if any spare AA I may have left in that FY.  The downside (if that is how to describe it, first world problems etc), is that it has brought home how much dodgy ground I may be on with my current SS plan should I receive a reasonable salary review increase. 

zagfles

cloud_dog said:

Hi
I'm unsure if anyone in my organisation would be able to answer this, and it probably wouldn't fall under the scheme administrators remit.

So for pension payments made under salary sacrifice for a DB scheme, would the PIA count as a company contribution (non-TR amount) or personal contribution (TR amount)? 

Why do you think it matters?

cloud_dog

zagfles said:

Why do you think it matters?

Because if I can take the September CPI values and work through the PIA calculation (during March) then the figure might be a lot lower than my original calculation (my basic premise, which I thought would be relatively stable) thereby giving me more bandwidth to contribute more, within the £40k AA for non-tax relief contributions (salary sacrifice).  

zagfles

cloud_dog said:

zagfles said:

Why do you think it matters?

Because if I can take the September CPI values and work through the PIA calculation (during March) then the figure might be a lot lower than my original calculation (my basic premise, which I thought would be relatively stable) thereby giving me more bandwidth to contribute more, within the £40k AA for non-tax relief contributions (salary sacrifice).  

What do you mean "£40k AA for non-tax relief contributions"? As far as the AA goes, it doesn't matter whether the PIA comes from employer (eg sal sac) conts or employee contributions.

For a DB scheme the PIA is calculated on the increase of the pension value, as you seem to be aware. It makes no difference whatsoever to the PIA or AA what proportion came from employer or employee conts. Only the increase in pension value matters, not who paid what.

cloud_dog

As xylophone linked to in the second post, the PIA for a DB scheme is deemed to be a company contribution under salary sacrifice, therefore it needs to be counted as part of the £40k AA (for non-tax relief contributions).

Unless I've misinterpreted or misunderstood?

zagfles

cloud_dog said:

As xylophone linked to in the second post, the PIA for a DB scheme is deemed to be a company contribution under salary sacrifice, therefore it needs to be counted as part of the £40k AA (for non-tax relief contributions).

Unless I've misinterpreted or misunderstood?

That sounds like it's talking about a DC scheme. But again, it makes no difference whatsoever to the PIA whether you sal sac say £10k and the employer pays that £10k into the pension, or you pay in £10k as a employee cont via net pay, or you pay in £8k to a RAS scheme and the scheme claims £2k tax relief.

The PIA is £10k in all cases.No difference whatsoever as far as the PIA or the AA are concerned.

And for a DB scheme, like I said. it makes no difference who paid what, it's the increase in pension value that counts. Where the conts came from make no difference. Why do you think it makes a difference?

Why do you keep going on about "£40k AA (for non-tax relief contributions)". There is no separate AA for "non-tax relief conts".

You seem to have some fundamental misunderstanding about the AA

cloud_dog

Ok, two things... I understand what PIA is, and I understand that within a DB scheme PIA is deemed a company contribution.

As all monies going in to my pension are under Salary Sacrifice, all are company derived.  Where I may be falling down is how to treat the PIA within the considerations on any of the pension limits.  To be clear I make zero contributions in to my pension, all contributions are gross company ones and it was my understanding that these counted towards the £40k annual limit.  And, IF this the case then wouldn't the PIA figure need to be counted against company totals?

Put another way, simplistically, I have a PIA of £7k, and I wish to put as much money as possible in to my pension only via salary sacrifice.  How much can be sacrificed?