Variable Salary Sacrifice

ussdave

Pat38493 said:

ussdave said:

af1963 said:

Even for a 40% tax payer. I can't see any obvious tax advantage - tax is worked out annually. Might be some smallish effects around NI differences if you could load more of your salary into a single month by reducing the sacrifice amount, so you pay the reduced NI rate that kicks in above about £4K per month on part of it, then go back to a higher sacrifice for other months.

The flexibility can still be useful though even if no specific extra savings.

Another forum member wrote a calculator to help work out potential benefits of lumpy SS.  It's actually fairly significant.

https://forums.moneysavingexpert.com/discussion/6455528/increasing-national-insurance-savings-by-making-large-pension-contributions-in-minimal-months

Question though - if the company is sharing 50% of their employer NI saving with the employee as an additional pension amount, does this change the calculation?

I've not done any calculations but I'd have thought that this would increase the benefit?  Though I've no idea what the bands for employer NI are, so those could be a negative impact potentially (e.g. if they are the reverse of employee NI bands, but that seems unlikely).

MallyGirl said:

ussdave said:

af1963 said:

Even for a 40% tax payer. I can't see any obvious tax advantage - tax is worked out annually. Might be some smallish effects around NI differences if you could load more of your salary into a single month by reducing the sacrifice amount, so you pay the reduced NI rate that kicks in above about £4K per month on part of it, then go back to a higher sacrifice for other months.

The flexibility can still be useful though even if no specific extra savings.

Another forum member wrote a calculator to help work out potential benefits of lumpy SS.  It's actually fairly significant.

https://forums.moneysavingexpert.com/discussion/6455528/increasing-national-insurance-savings-by-making-large-pension-contributions-in-minimal-months

I did this a few times and discovered (the hard way) that my employer had an undocumented limit of 70% of salary so I ended up with anything over that going in to the pension via a different method which did not save me the NI. Probably a lazy way of ensuring minimum wage was still paid. I decided after that it wasn't worth the effort.

How annoying

I've only this year got high enough into the HR band for this to be something worth looking at for me.  I suspect it'll be April next year before I try it out and it'll be interesting to see if my employer does the same.

MX5huggy

Employer NI is 13.8 after the nill rate band although there is 4 bands in total all 3 are 13.8%. So it would make no difference doing lumpy SS. 

https://www.gov.uk/national-insurance-rates-letters

Looks like there’s no point for a 20% tax payer in doing this.

Employers is just using a new provider which means we can vary the amount in 3 clicks as long as we are 10 days before payday. 

The example use of this is you can decide oh I need more money this month so I can knock it down to £2 for a couple of months then put it back to £200. It’s all done on £ figures not percentages. 

Marcon

Grumpy_chap said:

Most forms of SS cannot be varied "at will"
SS for pension contributions is an exception and can be varied whenever the employee chooses.


It is good that the employer is being fully flexible - despite the tax rules permitting regular change on SS pension contributions, some employers restrict this to annual (or another periodic) change to manage the admin burden.

Not always. Depends if the employer allows it - as you go on to say later in your post (above).