Sacrifice - work pensions -change

mascotty

Hi, 
Sorry haven't been around for a while, I have received a letter from work asking me if I would like to change the way I pay into my works pension with 'Nest' and calling it Sacrifice payments, which I think, I will earn a little more money but less pension or the other way around. I am unsure, I would prefer to leave it where it was but any advice would be appreciated and thank you in advance, we used to be able to upload documents but seems I cannot do this now but thank you anyway     

molerat

Salary sacrifice means that your salary is reduced and the employer pays the pension instead of you.  The benefit of this is that you pay less NI so up to 12% more goes into your pocket and the employer also pays less NI.  You of course need to be earning enough to pay tax and NI to benefit.  Do your current pension contributions come out of your gross pay before tax or from your net taxed pay with the pension provider adding 25% ?

MallyGirl

contributing via salary sacrifice saves you both tax and NI so more ends up in your pension.

mascotty

MallyGirl said:

contributing via salary sacrifice saves you both tax and NI so more ends up in your pension.

Hi and thank you for your valuable advice, I am currently on 25K a year I also decided two years ago to myself into an IVA as I could see no way out of all my debts (my own fault) trying to keep up with the big boys and failed, three more years to go and I don't want a credit card now or in the future, however, my works are pushing for me to give them an answer for the salary sacrifice and I am considering if to turn it down or accept it, I have until January the 3rd before they change it to the sacrifice, not sure what to do, I only want it to benefit myself and no others for my retirement.
Kind regards    

mascotty

molerat said:

Salary sacrifice means that your salary is reduced and the employer pays the pension instead of you.  The benefit of this is that you pay less NI so up to 12% more goes into your pocket and the employer also pays less NI.  You of course need to be earning enough to pay tax and NI to benefit.  Do your current pension contributions come out of your gross pay before tax or from your net taxed pay with the pension provider adding 25% ?

Comes out of my gross pay 

molerat

So the only difference you will see is that although your gross pay will reduce your net pay will be £12 higher for every £100 reduction.  The amount going into your pension will stay the same unless the employer agrees to pay in some of their NI savings, some do some don't.

Albermarle

Your employer will be giving you free money. In a typical minimum auto enrolment scheme with Salary sacrifice.
Then the employer contributes 3%, then your salary is reduced by 5% ( so no tax on it) and your employer adds this to your pension ( on your behalf effectively).
So 8% goes into your pension, but it has only cost you a reduction in your take home pay of 4%.
Plus you also pay a little less National Insurance.