Salary Sacrifice with Nest Pension

mickeywaffle

Dazed_and_C0nfused said:

No, the employee and employer both save NI and sometimes the employer agrees to put some (or all) of their saving into the pension as well as their normal contributions.

Thanks. This was not discussed but I suppose it's a moot point right now if my salary sacrifice isn't set up properly as it is haha.

But basically it should still be possible for a salary sacrifice to be set up with Nest pensions even though it's Relief At Source?

And this would reduce my NI and also the employer's NI.

MX5huggy

Those instructions are really clear to me, your company just has to put those employees that they want on SS (just you ATM) into a different group in the NEST system. Once the company and employees see the benefits you won’t be the only one. 

Dazed_and_C0nfused

But basically it should still be possible for a salary sacrifice to be set up with Nest pensions even though it's Relief At Source?

No, relief at source is where individuals contribute to a pension, either via their employer or by opening a personal pension or SIPP and the contributions attract 20% tax relief.  So if you contribute £100 then £25 is added by the pension company making a gross contribution of £125.

There is no pension tax relief with salary sacrifice as they are employer contributions.
If you sacrifice £100 of your salary then £100 is paid into your pension and no tax relief is added so you only have £100 in your pension fund, not £125.

But you have £100 less pay so you usually avoid paying £20 tax and £12 on that £100 you never earned.  So your take home pay only drops by £68.

mickeywaffle

Dazed_and_C0nfused said:

But basically it should still be possible for a salary sacrifice to be set up with Nest pensions even though it's Relief At Source?

No

Thanks. So what is this link describing?
https://www.nestpensions.org.uk/schemeweb/helpcentre/contributions/calculating-contributions/salary-sacrifice.html

I know I won't get that added relief to the pension contribution but it should still be beneficial from a tax/NI perspective for that pension contribution to be added by my employer and set up that way in Nest, right?

And that's still a salary sacrifice that can be done with Nest?

Or am I getting myself more confused?

Ed-1

mickeywaffle said:

Dazed_and_C0nfused said:

But basically it should still be possible for a salary sacrifice to be set up with Nest pensions even though it's Relief At Source?

No

Thanks. So what is this link describing?
https://www.nestpensions.org.uk/schemeweb/helpcentre/contributions/calculating-contributions/salary-sacrifice.html

I know I won't get that added relief to the pension contribution but it should still be beneficial from a tax/NI perspective for that pension contribution to be added by my employer and set up that way in Nest, right?

And that's still a salary sacrifice that can be done with Nest?

Or am I getting myself more confused?

Salary sacrifice is superior to relief at source as you still get the tax relief because you weren't taxed on the contrubution in the first place. So you get the relief up front at your marginal rate. Plus you save the 12% national insurance and up to 15% student loan repayments on it too (which you don't with relief at source).

mickeywaffle

Ed-1 said:

Salary sacrifice is superior to relief at source as you still get the tax relief because you weren't taxed on the contrubution in the first place. So you get the relief up front at your marginal rate. Plus you save the 12% national insurance and up to 15% student loan repayments on it too (which you don't with relief at source).

Cheers, got it. That's what I want to do but was told by my employer that since Nest operate with Relief At Source, that salary sacrifice couldn't be done at all.

But the instructions on the Nest website make it look like a salary sacrifice group can be set up by the employer.

Ed-1

Ed-1 said:

mickeywaffle said:

Dazed_and_C0nfused said:

But basically it should still be possible for a salary sacrifice to be set up with Nest pensions even though it's Relief At Source?

No

Thanks. So what is this link describing?
https://www.nestpensions.org.uk/schemeweb/helpcentre/contributions/calculating-contributions/salary-sacrifice.html

I know I won't get that added relief to the pension contribution but it should still be beneficial from a tax/NI perspective for that pension contribution to be added by my employer and set up that way in Nest, right?

And that's still a salary sacrifice that can be done with Nest?

Or am I getting myself more confused?

Salary sacrifice is superior to relief at source as you still get the tax relief because you weren't taxed on the contrubution in the first place. So you get the relief up front at your marginal rate. Plus you save the 12% national insurance and up to 15% student loan repayments on it too (which you don't with relief at source).

The National Insurance saving will of course now be 13.25% from April 2022 given recent announcements...

You could save through salary sacrifice a whopping 28.25% more in tax compared to relief at source as you save 13.25% NI, 9% SL and 6% PGL.

Dazed_and_C0nfused

Ed-1 said:

Ed-1 said:

mickeywaffle said:

Dazed_and_C0nfused said:

But basically it should still be possible for a salary sacrifice to be set up with Nest pensions even though it's Relief At Source?

No

Thanks. So what is this link describing?
https://www.nestpensions.org.uk/schemeweb/helpcentre/contributions/calculating-contributions/salary-sacrifice.html

I know I won't get that added relief to the pension contribution but it should still be beneficial from a tax/NI perspective for that pension contribution to be added by my employer and set up that way in Nest, right?

And that's still a salary sacrifice that can be done with Nest?

Or am I getting myself more confused?

Salary sacrifice is superior to relief at source as you still get the tax relief because you weren't taxed on the contrubution in the first place. So you get the relief up front at your marginal rate. Plus you save the 12% national insurance and up to 15% student loan repayments on it too (which you don't with relief at source).

The National Insurance saving will of course now be 13.25% from April 2022 given recent announcements...

You could save through salary sacrifice a whopping 28.25% more in tax compared to relief at source as you save 13.25% NI, 9% SL and 6% PGL.

And those with a few kids who would otherwise be liable to the HICBC will be laughing all the way to their SIPP!

mickeywaffle

Ed-1 said:

Ed-1 said:

mickeywaffle said:

Dazed_and_C0nfused said:

But basically it should still be possible for a salary sacrifice to be set up with Nest pensions even though it's Relief At Source?

No

Thanks. So what is this link describing?
https://www.nestpensions.org.uk/schemeweb/helpcentre/contributions/calculating-contributions/salary-sacrifice.html

I know I won't get that added relief to the pension contribution but it should still be beneficial from a tax/NI perspective for that pension contribution to be added by my employer and set up that way in Nest, right?

And that's still a salary sacrifice that can be done with Nest?

Or am I getting myself more confused?

Salary sacrifice is superior to relief at source as you still get the tax relief because you weren't taxed on the contrubution in the first place. So you get the relief up front at your marginal rate. Plus you save the 12% national insurance and up to 15% student loan repayments on it too (which you don't with relief at source).

The National Insurance saving will of course now be 13.25% from April 2022 given recent announcements...

You could save through salary sacrifice a whopping 28.25% more in tax compared to relief at source as you save 13.25% NI, 9% SL and 6% PGL.

I just now need to try and convince my employer to set it up haha. They were fine to agree to a salary sacrifice but then claimed it wasn't possible with nest.

Alexland

mickeywaffle said:

I just now need to try and convince my employer to set it up haha. They were fine to agree to a salary sacrifice but then claimed it wasn't possible with nest.

Have you tried sharing that link with your payroll administrator?

They are more likely to be able to action the required changes than us!