Salary Sacrifice and Tax Relief

soprano81

I have a Royal London pension that both myself (7.5%) and employer (5%) contribute to which is through salary sacrifice and I am a higher rate taxpayer 
When I look at my monthly pension contributions they work out as 12.5% of my gross salary which seems fine (I don't think the employer passes on their NI savings) 
My question is am I entitled to further tax relief than this or am I getting this all at source when deducted?
The RL Adviser seemed to think I was and suggested claiming an extra 20% through self assessment  - I am not sure if this correct? 
 Many thanks

xylophone

https://thepeoplespension.co.uk/salary-sacrifice/#:~:text=Salary%20sacrifice%20pension%20tax%20relief,a%20lower%20amount%20of%20salary.
See above.

zagfles

The RL adviser is talking rubbish. If you contribute via sal sac, you are not contributing anything, your employer is contributing the full 12.5% and your salary is reduced by 7.5%. You can't claim tax relief on employer contributions.

But obviously, as your salary is 7.5% lower, there is less salary for tax and NI to be charged on, so you effectively get tax and NI relief that way.

It really is worrying how many so called advisers, even it seems those working for big reputable firms like RL, don't understand the basics of pensions and how contributions work.

kinger101

You're not entitled to any tax relief on the pension contributions.  You're not making them.  Your employer is.   For the salary sacrificed part (7.5%), out of income that would otherwise be taxed.  

The pension will be taxable, but most likely at a marginal rate of 15 %.  So that £1 of sacrificed salary will be worth 85 p when drawn out of the pension.  Instead of 58 p (-40% tax and 2 % NI) had you received it as salary.  Think of it as buying 85 p for 58 p.  And that's ignoring the employer contribution.

kinger101

zagfles said:

The RL adviser is talking rubbish. If you contribute via sal sac, you are not contributing anything, your employer is contributing the full 12.5% and your salary is reduced by 7.5%. You can't claim tax relief on employer contributions.

But obviously, as your salary is 7.5% lower, there is less salary for tax and NI to be charged on, so you effectively get tax and NI relief that way.

It really is worrying how many so called advisers, even it seems those working for big reputable firms like RL, don't understand the basics of pensions and how contributions work.

We have a "benefits advisor" at work.  I had to draw him a diagram to explain why I wanted to up my monthly contributions instead of sacrificing the bonus which would have otherwise pushed me into HR.  I still not sure he believed me that NI and tax are calculated on different periodic basis.  I wonder how many people have lost money based on his free advice.

Brynsam

soprano81 said:

The RL Adviser seemed to think I was and suggested claiming an extra 20% through self assessment  - I am not sure if this correct? 

It's rubbish for the reasons explained above. I'd make a formal complaint about the 'advice' you received to stop this individual continuing to spout nonsense.

Albermarle

The RL Adviser seemed to think I was and suggested claiming an extra 20% through self assessment  -

You can only claim the extra tax relief if your contributions come out of your net income i.e. after tax and for sure a RL advisor should know that !

Dazed_and_C0nfused

Albermarle said:

The RL Adviser seemed to think I was and suggested claiming an extra 20% through self assessment  -

You can only claim the extra tax relief if your contributions come out of your net income i.e. after tax and for sure a RL advisor should know that !

It probably hasn't helped RL that the op themselves thought they were contributing to the pension?

zagfles

Dazed_and_C0nfused said:

Albermarle said:

The RL Adviser seemed to think I was and suggested claiming an extra 20% through self assessment  -

You can only claim the extra tax relief if your contributions come out of your net income i.e. after tax and for sure a RL advisor should know that !

It probably hasn't helped RL that the op themselves thought they were contributing to the pension?

They are, indirectly. Assuming the OP told the RL adviser it was sal sac, it is pure incompetance for the adviser to suggest claiming tax relief through self assessment.

Robert_McGeddon

soprano81 said:

I have a Royal London pension that both myself (7.5%) and employer (5%) contribute to which is through salary sacrifice and I am a higher rate taxpayer

OP, are you saying ALL the pension contributions are via salary sacrifice? Current workplace pension contributions mandated by government are 5% for employees and 3% for employers - might it be that your sal sac is only 2.5%? If that were the case then a claim for HR tax on the 5% may be relevant.

garmeg

Robert_McGeddon said:

soprano81 said:

I have a Royal London pension that both myself (7.5%) and employer (5%) contribute to which is through salary sacrifice and I am a higher rate taxpayer

OP, are you saying ALL the pension contributions are via salary sacrifice? Current workplace pension contributions mandated by government are 5% for employees and 3% for employers - might it be that your sal sac is only 2.5%? If that were the case then a claim for HR tax on the 5% may be relevant.

I paid no employee contributions into my work pension scheme. It was all done by salary sacrifice with no identified employee contributions. The employer paid in 50% of the employer NI saving on the sacrificed salary as well.