Minimum Wage and Pensions

MA260

.How do people see changes in the minimum wage affecting payments into pensions. It is muted that the Government will increase the Minimum wage to £10.50 from £9.50 from April 2023, This is likely to be above average wage increases.  This is 2 years that the minimum wage rises significantly above earnings. Given that this would work out at about 20K per Year for someone working full week, this means a lot more employees will be receiving salaries near to national living wage than before.  Many will not be able to use salary sacrifice schemes to receive tax/ NI rebates as the salary sacrifice schemes will below minimum wage.

NedS

Employees may not be able to take advantage (or as much advantage) of salary sacrifice schemes to benefit from NI savings, but they can still contribute to pension schemes in the normal way so there is no impact on pensions, only potentially on the avoidance of NI.

Marcon

MA260 said:

.How do people see changes in the minimum wage affecting payments into pensions. It is muted that the Government will increase the Minimum wage to £10.50 from £9.50 from April 2023, This is likely to be above average wage increases.  This is 2 years that the minimum wage rises significantly above earnings. Given that this would work out at about 20K per Year for someone working full week, this means a lot more employees will be receiving salaries near to national living wage than before.  Many will not be able to use salary sacrifice schemes to receive tax/ NI rebates as the salary sacrifice schemes will below minimum wage.

Depends what people can afford. For those already earning above the minimum wage, actual wage increases are likely to be of greater significance than an increase in the minimum wage. For those who earn only the minimum wage, it might mean they can afford to pay a bit more into their pension. The tax position is the same whether contributions are paid by salary sacrifice or as personal contributions. As pointed out in the previous answer, the only difference is that a bit more NI might be payable in the latter case.