Advice wanted following job change

spud

Hi all,
embarrassed to say I struggle to fully understand pension options so hoping for some guidance from the experts here with the following scenario:-
My current job has a pension scheme where I contribute 12% through salary sacrifice and the company 8%. I am a higher tax earner.
I have just accepted an offer at another company that only offer an auto enrolment pension with Vitality, employee 5% and employer 3%. However my base salary will be (nicely) increased by 60%+ so financially worthwhile. However, I wish to continue to save a similar 20 percent of my new salary, ideally in a pension. How can I most effectively, and tax efficientyly, do that? On asking I've been told that the company dont offer salary sacrifice. So really confused what I should plan to do (I have a 3 month notice period so plenty of time to plan). FYI I have another 10 years or so before I reach retirement age, a frozen final salary worth approx 15k/year and approx 100k in a DC fund.
Thanks in advance for any suggestions/advice.

Dazed_and_C0nfused

Do you know if the new employer uses,

Net pay (similar to sacrifice but they are employee contributions which reduce income for tax but not NI purposes)

Or

Relief at source (you pay a net contribution and the pension provider adds basic rate tax relief (25% of the net contribution) but your taxable income is unchanged)

Brie

Also check if the new pension accepts AVC (additional voluntary contributions.)  It may be cheaper (& easier) to get them to deduct an additional amount each month.  Check what the scheme T&Cs say.   Including anything about charges.  The alternative would be to open a private pension elsewhere, maybe a SIPP.

spud

Thanks. I’ll find out on those points but my future employer has indicated by conversations so far, that there isn’t much flexibility. Having just read up on SIPPs it feels like that maybe the best option to make up the 12% drop. Am I correct in thinking if I contribute 10% of my net salary each month, with the government contribution that would sufficiently close the gap? Any other downsides to taking out a SIPP alongside the company pension?

Marcon

spud said:

Thanks. I’ll find out on those points but my future employer has indicated by conversations so far, that there isn’t much flexibility. Having just read up on SIPPs it feels like that maybe the best option to make up the 12% drop. Am I correct in thinking if I contribute 10% of my net salary each month, with the government contribution that would sufficiently close the gap? Any other downsides to taking out a SIPP alongside the company pension?

I wonder how much your future employer understands about pensions - especially salary sacrifice? Do they realise the saving they could make in terms of employer NI?

As for lack of flexibility - what exactly do they offer in terms of 'allowing' employees to contribute more?

With this happening in respect of Vitality, now might be a good time for them to review their offering: https://adviser.vitality.co.uk/investments/abrdn-transfer/#:~:text=VitalityInvest%20has%20made%20the%20difficult,plans%20before%201%20September%202023.

Albermarle

spud said:

Thanks. I’ll find out on those points but my future employer has indicated by conversations so far, that there isn’t much flexibility. Having just read up on SIPPs it feels like that maybe the best option to make up the 12% drop. Am I correct in thinking if I contribute 10% of my net salary each month, with the government contribution that would sufficiently close the gap? Any other downsides to taking out a SIPP alongside the company pension?

Effectively auto enrolment pensions and most types of private sector workplace schemes and SIPP's are all Defined Contribution ( DC ) pensions. They are all governed by exactly the same rules for contributions , tax etc .
The only difference with a SIPP is that you have a much wider range of investment options and possibly more flexibility on withdrawal methods. Considering that about 95% of people never change their investments in their workplace pension from the default option, there is little advantage to having the vast choice in the SIPP. Can in fact be a little dangerous. Also depending on the SIPP and the investments you choose you might end up paying more or less in charges.
There are also personal and robo pensions that have a more limited/restricted range of investments.