help needed with pension to equivalent salary calculation?

chubsta

I have a very good idea of my retirement income, calculated to the penny looking ahead at different CPI etc - I have a lot of time on my hands!

But what I am struggling with is working out what would be the equivalent wage for what will effectively be my 'take-home' when I retire. This is of no importance whatsoever but would just like to know.

Obviously there are income tax, NI, and pension contributions taken off my wages which, apart from income tax at 20%, won't apply in the future but am not sure in which order they are taken.

So, if anyone has a bit of spare time on their hands, any chance of giving me the formula, as in if your 'take home' pension is £xxxxx then it would be equivalent to a salary of £xxxx.

hopefully this makes sense!

CKhalvashi

Uktaxcalculators has a reverse income calculator exactly for this.

You can calculate both with and without NI payments included.

I am not sure how they have formatted this but to reverse engineer in Excel would mean removing the NI element from the calculation.

Dazed_and_C0nfused

chubsta said:

I have a very good idea of my retirement income, calculated to the penny looking ahead at different CPI etc - I have a lot of time on my hands!

But what I am struggling with is working out what would be the equivalent wage for what will effectively be my 'take-home' when I retire. This is of no importance whatsoever but would just like to know.

Obviously there are income tax, NI, and pension contributions taken off my wages which, apart from income tax at 20%, won't apply in the future but am not sure in which order they are taken.

So, if anyone has a bit of spare time on their hands, any chance of giving me the formula, as in if your 'take home' pension is £xxxxx then it would be equivalent to a salary of £xxxx.

hopefully this makes sense!

There isn't a single answer to that as it depends on how you would get money into the pension.

Net pay is deducted from salary to give a lower taxable pay figure.  But you pay NI on the salary.

Salary sacrifice means you aren't contributing to the pension, you are agreeing to a reduced salary in return for additional pension contributions.  So you pay tax and NI on the actual salary received.

Relief at source (RAS) doesn't have any impact on your taxable or NIC'able pay.  You get pension tax relief added to your pension contribution instead.

Pat38493

You can also use this:
https://www.thesalarycalculator.co.uk/

If you are calculating retirement income, make sure you tick the option "i do not pay national insurance" under additional options.

The income tax on your pension will be exactly the same as on your salary so you get a certain amount (currently £12570) at 0% tax, then a band where you pay 20% tax, then up to 40%.  You can find the limits easily on ukgov website.

If you exactly know your retirement income I assume it is based on guaranteed income sources e.g. defined benefit pension, state pension, annuity?

NoMore

@Pat38493, you've misunderstood his question he wants to know the equivalent salary he would need to get the same take home income as his pension provides.

Its just a what if scenario, its for their interest.

chubsta

CKhalvashi said:

Uktaxcalculators has a reverse income calculator exactly for this.

You can calculate both with and without NI payments included.

I am not sure how they have formatted this but to reverse engineer in Excel would mean removing the NI element from the calculation.

Thanks very much for that, I managed to work backwards from the salary using their calculator.

As I said, not an important calculation, just interesting to know that when I retire I would be getting the same take-home income as someone on £xxxxx per year who was still working.

Pat38493

NoMore said:

@Pat38493, you've misunderstood his question he wants to know the equivalent salary he would need to get the same take home income as his pension provides.

Its just a what if scenario, its for their interest.

OK sorry - but the calculator I linked can do that too!