Better reducing workplace pension contribution in favour of Personal Pension?

P1Fanatic

cloud_dog said:

techno12 said:

Shimrod said:

The OP might also want to check whether the company shares some or all of it's NI saving from salary sacrifice - if it does then that makes the 50% contribution into the company pension very worthwhile.

Indeed. My company only pays in the statutory 3%, but does give all their NI saving to my pot. So I'm sacrificing 57% currently to compensate for their low level of contributions.

Wish my company did that

So, another 13.8%!!!

If your associated contribution level was £100, that would cost you £58, but £113.80 would end up in the account (for a cost of £58), a 96% uplift in your take home pay cost.  What is not to like?

How do you work out if you are getting the full NI savings? My company pension has a specific salary sacrifice calculator but I have to put in 1) Salary 2) employEE contribution % 3) employER contribution % - so cant just enter £100 contribution like your example. When I do run a calculation the breakdown it just shows NI rebate and NI relief as a value.

dunstonh

Are things like Life Assurance normally linked to Pensions? 

Most older occupational pension schemes included death in service if you are in the pension scheme (but not if you are not).   In the past you used to be able to get pension term assurance and FSAVC term assurance both in individual form and group form.

Law changes made the latter less viable or almost impossible to write or potentially create issues as the sum assured paid out goes towards the lifetime allowance.  

My companies Life Assurance (Death / Critical Illness) is totally separate as I understand it i.e. separate expressions of wish forms for nominating beneficiaries for pension and Life Assurance payout.

You don't name a beneficiary for life assurance unless it is under pension rules.   When it's not under pension rules, the only way to have beneficiaries is to put the life assurance in trust (putting aside life of another as that isn't used much outside of advisers).

P1Fanatic

dunstonh said:

Are things like Life Assurance normally linked to Pensions? 

Most older occupational pension schemes included death in service if you are in the pension scheme (but not if you are not).   In the past you used to be able to get pension term assurance and FSAVC term assurance both in individual form and group form.

Law changes made the latter less viable or almost impossible to write or potentially create issues as the sum assured paid out goes towards the lifetime allowance.  

My companies Life Assurance (Death / Critical Illness) is totally separate as I understand it i.e. separate expressions of wish forms for nominating beneficiaries for pension and Life Assurance payout.

You don't name a beneficiary for life assurance unless it is under pension rules.   When it's not under pension rules, the only way to have beneficiaries is to put the life assurance in trust (putting aside life of another as that isn't used much outside of advisers).

Must be the latter for mine then. Just had a look at the wording:

In the event of your death the Trustee will decide who will receive any benefit payable under the terms of the Scheme. They will take into account your circumstances at the time of your death and your wishes as per your Expression of Wish Form.

Middle_of_the_Road

Pensions, annuities & retirement planning — MoneySavingExpert Forum

A better place for this discussion maybe? ^

Shimrod

P1Fanatic said:

Shimrod said:

Apodemus said:

Albermarle said:

Apodemus said:

Should the OP not also be considering the actual details of the workplace pension?  For all we know from the above, it could come with guaranteed, salary-based levels of future pension income, spouse benefits, death-in-service benefits, indexing, provisions for redundancy etc.  None of which would be met by a SIPP.  On the other hand, the workplace may be in a risky industry and the pension scheme may be at more of a risk of default.   Also, the OP should investigate how each is likely to balance out if they choose to retire early, or need to for health reasons.

I think most replies have assumed that the OP just had a standard DC workplace pension, as that was the way it sounded, although not stated explicitly. The fact that they add 50% of their salary would mean that it it will not be a DB pension. So most likely it will have no associated benefits, although the OP may like to confirm that for completeness.

Quite so, we are all assuming.  My main point, though, is that there is so much more to this than simply the tax situation and this  may be one of these situations where one should be careful not to let the tax "tail" wag the pensions "dog" - although I sincerely hope that Silvercue doesn't have a dog of a pension! 

The OP does say they would reduce the overpayments into the work scheme and not leave it completely. This would retain any enhanced life assurance that would typically come with a work-based pension. If it was a salary-linked pension I would expect the conversation to be around buying extra years rather than simple overpayments.

The OP might also want to check whether the company shares some or all of it's NI saving from salary sacrifice - if it does then that makes the 50% contribution into the company pension very worthwhile.

Are things like Life Assurance normally linked to Pensions? My companies Life Assurance (Death / Critical Illness) is totally separate as I understand it i.e. separate expressions of wish forms for nominating beneficiaries for pension and Life Assurance payout.

There may be a  different death in service rate for pension members. In my current job it is a standard 4x salary regardless of pension membership. My previous role was 2x salary as standard but 3x salary if you were a member of the (DC) pension scheme. The actual death in service benefit is separate from the pension scheme in both cases, pension membership may just change the amount your family gets.

cloud_dog

P1Fanatic said:

cloud_dog said:

techno12 said:

Shimrod said:

The OP might also want to check whether the company shares some or all of it's NI saving from salary sacrifice - if it does then that makes the 50% contribution into the company pension very worthwhile.

Indeed. My company only pays in the statutory 3%, but does give all their NI saving to my pot. So I'm sacrificing 57% currently to compensate for their low level of contributions.

Wish my company did that

So, another 13.8%!!!

If your associated contribution level was £100, that would cost you £58, but £113.80 would end up in the account (for a cost of £58), a 96% uplift in your take home pay cost.  What is not to like?

How do you work out if you are getting the full NI savings? My company pension has a specific salary sacrifice calculator but I have to put in 1) Salary 2) employEE contribution % 3) employER contribution % - so cant just enter £100 contribution like your example. When I do run a calculation the breakdown it just shows NI rebate and NI relief as a value.

Employer NICs are 13.8% on the sacrificed amount.  If as the OP said their employer contributes 100% of their savings then it is simply 13.8% of the sacrificed amount.

In your calculator you would enter the percentage you want to sacrifice, lets say 5%.  If they pay 5% of your full salary and you earn £40k, then that would be £2k pa / £166.66pm.  If we assume the employer matches up to 5%, then their amount would £2k pa / £166.66pm.  If it was based on qualifying earnings then these numbers would be lower.

It is not usual (???) for employers to offer all of their NICs savings in addition to your NIC savings, so it is highly unlikely that a SS calculator would factor this in.

Obviously, I have no access to this calculator so cannot verify any of the details, all I can say for certainty is that if (for example) £153 was sacrificed in to the pension I would expect to see £174.11 deposited (either in a single or separated entries).

silvercue

I see some people have asked about my NI contributions.  My NI contributions have dropped from £432 per month to £215 per month - so I seem to have got some benefit there too.