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NHS Car Lease through Salary Sacrifice impact on Pension

jimpom23
Posts: 11 Forumite


Hi all
I'm hoping you can help this numeric illiterate when it comes to understanding the impact of the above scheme on my overall pension position
I am a higher rate taxpayer on the 2015 career average scheme, contributing 12.5% in pension with 20-25 yrs left until retirement and am looking into an electric car lease for 36months as the Benefit in Kind rates are very low and making the deal look attractive. My calculations for one particular quote are as follows:
I'm hoping you can help this numeric illiterate when it comes to understanding the impact of the above scheme on my overall pension position
I am a higher rate taxpayer on the 2015 career average scheme, contributing 12.5% in pension with 20-25 yrs left until retirement and am looking into an electric car lease for 36months as the Benefit in Kind rates are very low and making the deal look attractive. My calculations for one particular quote are as follows:
Salary Sacrifice
Monthly Gross Salary Sacrifice:£ 535.88
Savings on NI:£ -10.72
Savings on Tax:£ -165.79
Savings on Pension:£ -66.99
Total savings per month:£ -243.50
Monthly Take Home Pay reduced by:£ 292.38
Monthly Car Tax Liability:£ 0.00
Savings on NI:£ -10.72
Savings on Tax:£ -165.79
Savings on Pension:£ -66.99
Total savings per month:£ -243.50
Monthly Take Home Pay reduced by:£ 292.38
Monthly Car Tax Liability:£ 0.00
Total cost per month:£ 292.38
From my limited understanding the liability is around the Pension and NI savings but what I ultimately would like to know is the material impact on my pension come retirement, per month. I'm hoping someone can clarify for me and ideally show me how to work this out so I don't have to bother any more strangers with stupid questions
I found a similar post, albeit for a higher monthly cost and one respondent suggested a 3yr lease would take £35k out of their pension pot which sounds frightening?!!!
Thanks in advance
From my limited understanding the liability is around the Pension and NI savings but what I ultimately would like to know is the material impact on my pension come retirement, per month. I'm hoping someone can clarify for me and ideally show me how to work this out so I don't have to bother any more strangers with stupid questions

Thanks in advance
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Comments
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How much does your NHS employer pay into your pension ?
For example a Paramedic pays 9.3% and the NHS ambulance service pays 20.68% into your pension pot.
So yes you save money on pension contributions but your employer saves a whole lot more.
Less money in the pot means a poorer retirement.
Can you not buy a 6 months old vehicle maybe a Nissan leaf ?0 -
dimbo61 said:How much does your NHS employer pay into your pension ?
For example a Paramedic pays 9.3% and the NHS ambulance service pays 20.68% into your pension pot.
So yes you save money on pension contributions but your employer saves a whole lot more.
Less money in the pot means a poorer retirement.
Can you not buy a 6 months old vehicle maybe a Nissan leaf ?
I actually already have a car, which I would sell to help finance as the depreciation of that plus insurance, tax, fuel etc that is included with the lease is more than the lease would cost me (on paper at least). The driver at this moment in time is the deals that are available on Electric cars, this particular one is a £60k+ Audi ETron which at under £300/month would appear to be an amazing deal, but obviously not if it knocks tens of thousands off my pension!0 -
Have you asked your HR / pension people what the impact of using Salary Sacrifice would be on your pension as how the NHS scheme handles SS payments is the issue?
Not car related but I am in the LGPS and don't have access to SS for anything but my understanding from comments on here for those who are part of other LGPS area schemes that do support SS payments is that anything contributed to the LGPS AVC pot under SS arrangements doesn't affect your main LGPS pension as that is calculated using your nominal annual salary as per youir grade and payscale.
If the NHS scheme treats SS car leases in this way it has no effect.
Is there not any information on this in the lease scheme guide / FAQs or in the NHS pension scheme guide / FAQS?0 -
AlanP_2 said:Have you asked your HR / pension people what the impact of using Salary Sacrifice would be on your pension as how the NHS scheme handles SS payments is the issue?
Not car related but I am in the LGPS and don't have access to SS for anything but my understanding from comments on here for those who are part of other LGPS area schemes that do support SS payments is that anything contributed to the LGPS AVC pot under SS arrangements doesn't affect your main LGPS pension as that is calculated using your nominal annual salary as per youir grade and payscale.
If the NHS scheme treats SS car leases in this way it has no effect.
Is there not any information on this in the lease scheme guide / FAQs or in the NHS pension scheme guide / FAQS?0 -
Assuming your pension is under the 2015 scheme, this accumulates annually at a rate of 1/54 of your salary AFTER salary sacrifice. More details of the 2015 scheme here https://www.nhsbsa.nhs.uk/sites/default/files/2017-03/Key Notes-2015 Scheme Estimates (web)-20161122-(V1).pdf
Each 1/54 is increased to reflect inflation every year and all these amounts together will make up your annual pension.
The impact of the salary sacrifice is therefore that your pension contributions are reduced (the £66.99 per month), and therefore so will your pension be, but as far as i can see, not by very much. Another thing to bear in mind is that there will be additional tax to be paid in years 2 and 3 of the deal, as the tax break for electric cars is reduced, but this is very small (1% and 2% respectively).
Overall you may feel that these modest impacts on your future income are worth it. I do agree that the deal on that car is very good. I have a colleague who got one and is well chuffed!2 -
saucer said:Assuming your pension is under the 2015 scheme, this accumulates annually at a rate of 1/54 of your salary AFTER salary sacrifice. More details of the 2015 scheme here https://www.nhsbsa.nhs.uk/sites/default/files/2017-03/Key Notes-2015 Scheme Estimates (web)-20161122-(V1).pdf
Each 1/54 is increased to reflect inflation every year and all these amounts together will make up your annual pension.
The impact of the salary sacrifice is therefore that your pension contributions are reduced (the £66.99 per month), and therefore so will your pension be, but as far as i can see, not by very much. Another thing to bear in mind is that there will be additional tax to be paid in years 2 and 3 of the deal, as the tax break for electric cars is reduced, but this is very small (1% and 2% respectively).
Overall you may feel that these modest impacts on your future income are worth it. I do agree that the deal on that car is very good. I have a colleague who got one and is well chuffed!0 -
You are sacrificing £535 salary per month or £6,420 per year.
If your pensionable salary is after this sacrifice (it may not be, it may be before so no impact) then your pension earned this year will be £6,420 / 54 or approx £120 lower. Assuming the pension grows in line with inflation up to retirement and is paid for 20 years then you will lose about £2,400 in pension income.
This is similar to the tax saving so you are effectively paying £535 per month for the car from your own pocket if you allow for the lower pension.
It may still be worth it, of course, but tne choice is yours.
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garmeg said:You are sacrificing £535 salary per month or £6,420 per year.
If your pensionable salary is after this sacrifice (it may not be, it may be before so no impact) then your pension earned this year will be £6,420 / 54 or approx £120 lower. Assuming the pension grows in line with inflation up to retirement and is paid for 20 years then you will lose about £2,400 in pension income.
This is similar to the tax saving so you are effectively paying £535 per month for the car from your own pocket if you allow for the lower pension.
It may still be worth it, of course, but tne choice is yours.0 -
jimpom23 said:garmeg said:You are sacrificing £535 salary per month or £6,420 per year.
If your pensionable salary is after this sacrifice (it may not be, it may be before so no impact) then your pension earned this year will be £6,420 / 54 or approx £120 lower. Assuming the pension grows in line with inflation up to retirement and is paid for 20 years then you will lose about £2,400 in pension income.
This is similar to the tax saving so you are effectively paying £535 per month for the car from your own pocket if you allow for the lower pension.
It may still be worth it, of course, but tne choice is yours.
However your pensionable salary may be the salary before the car salary sacrifice so it might be worth checking which is the case.1 -
garmeg said:jimpom23 said:garmeg said:You are sacrificing £535 salary per month or £6,420 per year.
If your pensionable salary is after this sacrifice (it may not be, it may be before so no impact) then your pension earned this year will be £6,420 / 54 or approx £120 lower. Assuming the pension grows in line with inflation up to retirement and is paid for 20 years then you will lose about £2,400 in pension income.
This is similar to the tax saving so you are effectively paying £535 per month for the car from your own pocket if you allow for the lower pension.
It may still be worth it, of course, but tne choice is yours.
However your pensionable salary may be the salary before the car salary sacrifice so it might be worth checking which is the case.2
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