Salary Sacrifice and NI payments

jamjar92

I have been paying AVC's for a few years, where I get tax relief at source. I heard, work, are going start a Salary Sacrifice scheme for AVC contributions, where you can reinvest the saved NI., sounds good.

However using the calculator on their site, illustrate the savings, I entered £200 for shared cost additional voluntary contributions, its returns for the salary sacrifice amount £234.02, additional shared cost AVC amount £1.00, monthly national insurance savings £28.08. This remains the same for any salary amount up to £50,000.

 anything above £50,000, (the scale goes up and down in £1,000), so £51,000 the monthly national insurance savings drops to £4.21, is that right?

So am I correct in thinking for anything earned over 50,000 need to be invested towards the pension to make joining scheme worth it? Does your normal pension deduction lower this £50,000 figure, I pay 8% currently.

My basic is a under the £50,000, but if I do overtime which is not guaranteed, may tip over £50K by the end of a tax year.

bigadaj

NI is lower when you start paying higher rate tax, total tax relief is therefore 42% for higher rate taxpayers and 33% for standard rate tax payers, it's more beneficial for higher rate taxpayers but the amount of NI savings is lower.

mark55man

For employee contributions - I'm not quite sure but my initial reaction is you pay NI at 12% between the primary threshold (180 pw) and the UEL (upper earnings limit) which is about £960pw.  Above that the NI rate is 2% so you would expect not to get the full amount rebate.  This is the NI that you are not paying by doing salary sacrifice so it is reasonable but not obligatory to expect the employer to pass it on

cloud_dog

OP if you only marginally go over the usual £50k threshold for paying HRT then your existing pension contributions are likely to bring you below the HRT threshold already.  Obviously without specific numbers we cannot be absolute but it seems reasonable.

As the above posters have mentioned by SS as a BRT payer you will benefit by saving yourself an additional 12% NI contributions on top of the standard BRT saving of 20%.  So, your £200pm contribution will only reduce your take home pay by £136pm.

jamjar92

Thats a good question I can ask on the seminar they are running in a few weeks when the new scheme launch about HRT and existing company pension payments.

mark55man

don't expect too much from the seminar, you probably already in the top 10% in terms of knowledge

my company did a pension seminar where the two speakers were respectively "unable to retire until 67 as they had not planned properly" and "only doing the session as he was so unsatisfied with his retirement life choices" - unsurprisingly it wasn't that great

jamjar92

I am thinking at it now as, if I pay HRT I win on tax and when I pay BRT I win on reduced NI and its invested. So it maybe worth swopping the standard AVC scheme to the SSAVC, the only downside is salary reduction for my Mortgage, going to move lender in 2 years when fixed rate ends. Makes no difference to pension scheme as they use the notional salary for DB.

cloud_dog

SS is absolutely worth it.

Regarding mortgages etc, SS has been around for many years now and lenders are used to people being in SS schemes, you will just need to evidence your contracted salary.  Mine is all in the monthly payroll form I receive, with SS deductions annotated (Sal Sac).

jamjar92

Thanks cloud_dog, thats good to know, I am sure I read somewhere if they write to your employer they will say your salary was the amount less the SS. SCAVC documentation something about 12 months, but then says you can change the amount up and down  at any time.

MallyGirl

mark88man said:

don't expect too much from the seminar, you probably already in the top 10% in terms of knowledge

my company did a pension seminar where the two speakers were respectively "unable to retire until 67 as they had not planned properly" and "only doing the session as he was so unsatisfied with his retirement life choices" - unsurprisingly it wasn't that great

I went to one of these - by the end the speaker was just looking to me to answer the questions from other attendees as he just didn't know enough. 

jamjar92

MallyGirl said:

mark88man said:

don't expect too much from the seminar, you probably already in the top 10% in terms of knowledge

my company did a pension seminar where the two speakers were respectively "unable to retire until 67 as they had not planned properly" and "only doing the session as he was so unsatisfied with his retirement life choices" - unsurprisingly it wasn't that great

I went to one of these - by the end the speaker was just looking to me to answer the questions from other attendees as he just didn't know enough. 

I know what you mean, this one's going to be virtual because of Covid, so probably have a chat window, where will decide to take the question or not due time restrictions.