Help working out pension contribution increase

Andherewego

Hello. I am hoping someone far cleverer than me can help with pension contribution help. 

I am on the basic contribution scheme of 5% employee, 3% employer on eligible earnings from a salary of £75k (taxed at source). I would like to increase this to an extra £500 a month post tax (which is what I can afford to lose a month). What % employee contributions do I need to instruct my employer? I worked out it is 29% but is that right? 

Many thanks

TheMilkmansDad

5% of £75k is approx £312.50 per month that you are currently contributing - is that correct?

If so, 13% would equate to £812.50 per month which is a £500 increase.

I may be getting muddled with the taxed at source part!

FlimFlam01

is your current deduction around £183 a month?

Do you want to increase it to around £683 a month?

If so, that would be around 18% if it's an auto enrollment scheme based on upper earnings limits.

Marcon

I'm a bit confused by your post! 29% of your salary of £75,000 is £21,750 a year, or £1,812.50 a month, so 29% looks a bit wide of the mark.

If 'taxed at source' means 'relief at source' (i.e. payments to the scheme are made from your post-tax salary), for each £1 you want to see added to your pot via personal contributions, you need to contribute  80p. Basic rate tax is then added to your pension pot. To add another £500 a month to the pot, you'd need to contribute a further £400 a month. If you pay in £500 from your net salary, then the provider would add £125, thus adding a further £625 a month to your pot in addition to your current contributions.



Sorry to answer a question with a list of questions, but hopefully they might help if you're not already aware of these: 

Are you paying contributions from your salary, or by salary sacrifice? If you aren't using salary sacrifice, might be worth asking your employer if you can?

Are your 'eligible earnings' the same as your £75K salary?

Are you aware that you can claim higher rate tax relief on pension contributions via your self assessment tax return, or direct from HMRC? You can only claim higher rate relief to the extent you've actually paid it in the first place.

Andherewego

My current deduction is £146.24 + £36.56 which I presume is tax?

the taxed at source bit is confusing me!

I can afford to put in an extra £500 after tax - but presumably that is more pre tax? This is the bit boggling me - pre and post tax!

I had some advice advising I should instruct 29.5% but I just can’t see that is correct. 

Thank you so much 

Andherewego

TheMilkmansDad said:

5% of £75k is approx £312.50 per month that you are currently contributing - is that correct?

If so, 13% would equate to £812.50 per month which is a £500 increase.

I may be getting muddled with the taxed at source part!

No - I am currently paying £146.24 which apparently is the maximum. 

FlimFlam01

Andherewego said:

My current deduction is £146.24 + £36.56 which I presume is tax?

the taxed at source bit is confusing me!

I can afford to put in an extra £500 after tax - but presumably that is more pre tax? This is the bit boggling me - pre and post tax!

I had some advice advising I should instruct 29.5% but I just can’t see that is correct. 

Thank you so much 

This reads like an auto enrollment scheme where your contributions are based on a maximum amount of just over £50k per year, your numbers are very close to my assumption of  £183 per month into your pension pot, so your increase should be to a value of around 18% or so, maybe increase it to 15% initially and see how that works and then ask your payroll to adjust it again a month later if you want to increase/decrease it.

Andherewego

Thank you. So I need to ask for 15% (to test) not 15% plus the 5% I already sacrifice?

Andherewego

Marcon said:

I'm a bit confused by your post! 29% of your salary of £75,000 is £21,750 a year, or £1,812.50 a month, so 29% looks a bit wide of the mark.

If 'taxed at source' means 'relief at source' (i.e. payments to the scheme are made from your post-tax salary), for each £1 you want to see added to your pot via personal contributions, you need to contribute  80p. Basic rate tax is then added to your pension pot. To add another £500 a month to the pot, you'd need to contribute a further £400 a month. If you pay in £500 from your net salary, then the provider would add £125, thus adding a further £625 a month to your pot in addition to your current contributions.



Sorry to answer a question with a list of questions, but hopefully they might help if you're not already aware of these: 

Are you paying contributions from your salary, or by salary sacrifice? If you aren't using salary sacrifice, might be worth asking your employer if you can?

Are your 'eligible earnings' the same as your £75K salary?

Are you aware that you can claim higher rate tax relief on pension contributions via your self assessment tax return, or direct from HMRC? You can only claim higher rate relief to the extent you've actually paid it in the first place.

Thank you for this incredibly useful comment. To answer your questions..
yes this is salary sacrifice
My eligible earnings are £44030 supposedly

Thank you!!

FlimFlam01

Andherewego said:

Thank you. So I need to ask for 15% (to test) not 15% plus the 5% I already sacrifice?

just say you'd like to increase your contributions from 5% to 15%.

mark5

Can’t you just state the amount you want deducted?

I pay £500 per month fixed as long as this amount is above 5% my employer is happy. (Costs me about £400 of take home pay).