Non-Contributory Pension plus salary/benefits sacrifice?

jhxmt

Wonder if people here can help me get a handle on this (or at least check that my understanding is correct!)

I'm moving employments very shortly. My future employer offers a non-contributory money purchase scheme (no idea about fund choices as yet, as I don't have the literature through) which pays in 6% of my annual salary without anything from my end.

So far so good and, obviously, I'd be an idiot not to join the plan.

My question relates to increasing the amount of employers contributions.

Ordinarily, I would (each month) get a small additional benefits allowance. If just taken as cash every month as part of my salary, it would be subject to tax and NI, as per usual.

Alternatively, I can spend an (apparently arbitrary) amount of it per month to get my future employer to increase their contribution. I don't have the exact figures to hand but, for example, if I were to pay £20pm (without tax/NI) from the benefit allowance, rather than taking it as cash, then my employer would increase their contribution by 1% (to 7% total).


My question is firstly "Is this a good idea?" which, I know, is difficult if not impossible to answer without exact figures.

Secondly is to check whether my method of assessing it is correct: if I were to work out how much each %age point contribution is worth from my employer then presumably any increase that costs me less than that worth is a good choice, correct?

E.g. if I'm on a salary of £25,000, that means that each %age contribution from my employer is worth £250. Therefore I should, in theory, spend my benefits package on increasing my employer's contributions up to the point that one further %age point would cost me more than £250.

Correct logic? Incorrect logic? Logic that completely misses the point? All opinions welcomed!

Andy_L

Sounds like a "salary sacrifice" scheme do a search (here & on the wider internet) there should be the formula to do the calculation. What you want to find out is how much of the employers savings in NI are passed onto you

welshtony

Your first call here ought to be to the Personnel Dept of your new employer. They have put in place and given you details of a plan that you don't understand. A significant part of their role is to maximise the appreciation of the benfits plans they offer new and existing employees.

They ought to appreciate your call as being one that will enable them to fine tune their communixcations to new and prospective employees.

It will be interesting for you to see how they respond!

It's not uncommon for employers plans to have an element of "matching" contributions, but I haven't personally come across one that works in the way you suggest; the ones I am familiar with are straightforward like:

- if you choose to pay a contribution to your plan the company will match your contribution £ for £ up to (x% or £x) per (month/year).

It may or may not be linked to a salary sacrifice arrangement, but it is free money from your employer.

So as long as you are happy with the general restrictions and charges that apply to your company plan (you don't say if it is a trust based or a PP plan), particularly in terms of the options that are available to early leavers, and you can afford to lock your money away for the period till you can take benefits, you'd be very hard pushed to find another home for your money that would give you a return that comes close to the additional employers contribution inputs.