Help working out pension contribution increase

Dazed_and_C0nfused

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

yes this is salary sacrifice

Those two statement contradict each other.

The first indicates a relief at source contribution from you (where basic rate tax relief is added).

Whereas salary sacrifice means you don't contribute anything, so cannot get any pension tax relief as they are extra employer contributions (you sacrifice pay in return for the additional employer contributions).

zagfles

Dazed_and_C0nfused said:

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

yes this is salary sacrifice

Those two statement contradict each other.

The first indicates a relief at source contribution from you (where basic rate tax relief is added).

Whereas salary sacrifice means you don't contribute anything, so cannot get any pension tax relief as they are extra employer contributions (you sacrifice pay in return for the additional employer contributions).

It could be just the way it's itemised on payslips, for instance AE minimums on qualifying earnings are often expressed as employer 3%, employee 4%, tax relief 1%, eg see https://www.moneyhelper.org.uk/en/pensions-and-retirement/auto-enrolment/how-much-do-i-and-my-employer-have-to-pay

So with sal sac the employee min deduction will be 5% but might be itemised at 4% plus 1%, with sal sac the extra 1% being deducted from gross pay rather than claimed by the pension provider as would happen with RAS.

Assuming this is the case, then for OP to increase his pension conts such that his net pay is £500 lower, the gross pay would need to be 500/0.58 lower [marginal tax rate is 40%, marginal NI rate 2%, so net = gross * (1-0.4-.0.02) = gross*0.58 so gross = net/0.58 ]  so 862.07 per month ie 10344.84 per year, which as a % of qualifying earnings is 10344.84/44030 = 0.235 or 23.5% so adding to current 5% makes a total of 28.5% empolyee cont. They might only allow whole percentages so OP would need to decide whther to go a bit above or below the £500 net. So the 29% the OP calculated looks about right. But note that needs to be the total contribution, including the "tax relief" part if that's itemised separately, and the existing contribution. Also needs to make sure additional contributions are based on qualifying earnings not total earnings, sometimes additional contributions are treated differently.

Note the calculations will be different if in Scotland, or if repaying a student loan.