Two Job - BR Tax

Its_all_Dinx

So my wife has two jobs.  We got talking and I said to her with my job. We have enough money coming in to keep the house running.  I said to her that she should put all her wages into her pension from her 2nd job.  Her 2nd job tax code is BR and her company allows her to put 99% of her wage into pension.  She wasn't to sure about this.

I said when your hit 58 years of age.  She can retire early and take small lump sums in cash each year and this will keep her going as all her wages went into her pension.

What are your thoughts?   Put it all into pension or leave it and take the wages?

Dazed_and_C0nfused

What method is being used to make these pension contributions?

The usual two are relief at source and net pay but there is also salary sacrifice.

Irrespective of that though there is usually an immediate 6.25% benefit for a basic rate payer contributing now and then taking the pension income when they are also a basic rate payer. 

It's even more of a benefit if they can take the pension income in year(s) when no tax is payable on it i.e. use this particular pension as a bridging pension to fund early retirement years between stopping work and State Pension and other pensions starting to be paid.

Its_all_Dinx

Dazed_and_C0nfused said:

What method is being used to make these pension contributions?

The usual two are relief at source and net pay but there is also salary sacrifice.

Irrespective of that though there is usually an immediate 6.25% benefit for a basic rate payer contributing now and then taking the pension income when they are also a basic rate payer. 

It's even more of a benefit if they can take the pension income in year(s) when no tax is payable on it i.e. use this particular pension as a bridging pension to fund early retirement years between stopping work and State Pension and other pensions starting to be paid.

The pension is taken as a salary sacrifice pension is taken before tax.

Your last paragraph is what I was saying she could do.  Take it in small cash lump sums and stay within her tax free allowance.

Dazed_and_C0nfused

She could do it but not how you want.

If she actually asks them to increase her contributions that much they will realise they will fall foul of national minimum wage rules.

https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye#:~:text=A salary sacrifice arrangement must,ensure NMW rates are maintained.

She could do the equivalent by making relief at source contributions to a personal pension or SIPP but there would be no personal tax or NI savings with these.

She would get 25% added to each contribution though as the basic rate pension tax relief i.e. £100 from her becomes £125 in her pension pot.

p00hsticks

Its_all_Dinx said:

Dazed_and_C0nfused said:

What method is being used to make these pension contributions?

The usual two are relief at source and net pay but there is also salary sacrifice.

Irrespective of that though there is usually an immediate 6.25% benefit for a basic rate payer contributing now and then taking the pension income when they are also a basic rate payer. 

It's even more of a benefit if they can take the pension income in year(s) when no tax is payable on it i.e. use this particular pension as a bridging pension to fund early retirement years between stopping work and State Pension and other pensions starting to be paid.

The pension is taken as a salary sacrifice pension is taken before tax.

Your last paragraph is what I was saying she could do.  Take it in small cash lump sums and stay within her tax free allowance.

If taken as salary sacrifice, I'm not sure she'll be allowed to put 99% in (unless she is an INCREDIBLY high earner, in which case she wouldn't be on BR tax code).

There is a recent thread on this board discussing the situation where the poster's employer took them off the salary sacrifice scheme because they weren't allowed to sacrifice to the extent that they would be being paid less than minimum wage.....

[Edit] The thread I'm referring to was actually over on the pension board here

https://forums.moneysavingexpert.com/discussion/6356325/hr-just-moved-me-automatically-into-a-non-salary-sacrifice-scheme/p1