Salary sacrifice

s4uch1e

My wife has recently received a letter from her employer asking if she would like to opt out of a salary sacrifice scheme getting introduced by her employer from October 2022. Says you dont pay pension contributions and they do it for you so you take hone mote pay.
Just wondering if this is all as its seems or should she opt-out???
Thanks for any advice 

Bimbly

For most people, Salary Sacrifice is the best way to contribute to a pension because it is the most tax efficient.

For some on low pay, it may not be advisable.

Have a read of this basic guide: https://www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot/salary-sacrifice-and-your-pension

MallyGirl

sal sac avoids some tax and also NI so it can be a good choice but it does depend on the way the employer implements it. If you give an idea of salary we can highlight points to investigate

s4uch1e

She is on a yearly pay of £16500.( if I worked it out correctly. 
£10.50/hour and 132 hrs/month 
Also in Scotland if that affects it
Thanx

JoeCrystal

Do you know if they are sharing the savings on Employer NI as well?

MallyGirl

s4uch1e said:

She is on a yearly pay of £16500.( if I worked it out correctly. 
£10.50/hour and 132 hrs/month 
Also in Scotland if that affects it
Thanx

you cannot sal sac below the national minimum wage (£9.50/hour) so she would be very limited on what would go into a pension this way.

Marcon

Bimbly said:

For most people, Salary Sacrifice is the best way to contribute to a pension because it is the most tax efficient.

It isn't the most tax efficient - the point about salary sacrifice is the saving in NI, not tax. In some cases salary sacrifice would actually be tax inefficient if the individual has earnings which are too low for them to pay tax, but they would still get 'tax relief' on personal contributions to a DC pension where the provider claims the tax top up and adds that to their pension pot.

Bimbly said:

For some on low pay, it may not be advisable.

Apart from the tax issue I've just mentioned, it is usually not a case of not being advisable - it may not be possible if salary sacrifice takes them below minimum wage.

Bimbly

Marcon said:

the point about salary sacrifice is the saving in NI, not tax.

it is usually not a case of not being advisable - it may not be possible if salary sacrifice takes them below minimum wage.

Exactly. Which is what I said.

Grumpy_chap

Marcon said:

Bimbly said:

For most people, Salary Sacrifice is the best way to contribute to a pension because it is the most tax efficient.

It isn't the most tax efficient - the point about salary sacrifice is the saving in NI, not tax. 

What is NI if not a tax?

Marcon

Grumpy_chap said:

Marcon said:

Bimbly said:

For most people, Salary Sacrifice is the best way to contribute to a pension because it is the most tax efficient.

It isn't the most tax efficient - the point about salary sacrifice is the saving in NI, not tax. 

What is NI if not a tax?

A source of confusion, which is why I clarified the point - see https://forums.moneysavingexpert.com/discussion/6388227/help-pension-annual-allowance-tax-relief-complicated-by-substantial-salary-sacrifice-inputs#latest and you will understand why it was no bad idea for me to do so.