Scottish Widows Defined Contribution Workplace Pension

huw01

I currently contribute into the workplace pension provided by Scottish Widows via salary sacrifice.
I can adjust my monthly payments up and down and take advantage of employer NI contributions savings which also get credited into my pension.

I think I can also contribute directly any extra payments myself and benefit from the 20% tax relief that would get added on top.

My question is as I am paying reduced income tax and NI due to salary sacrifice, does this limit the amount I can make as additional contributions and benefit from the 20% tax relief.

I have read about the 60k annual allowance, but I just want to be sure that I am not landed with a tax bill if I inadvertently receive more tax relief through the addtional payments I make outside salary sacrifice than income tax i would have paid on my reduced salary.

To give some additional context. 51 years old. Also have an lgps pension from a previous employment. I will scrape in due to my DOB to take it at 55 with an automatic lump sum (pre 2008 membership).

Looking at finishing my current job in 4 years, take by LGPS at a reduced rate (about 12k), then leave my scottish widows company pension in for a few years before I touch it, so in the meantime I am trying to build that pot up as much as I can. Also have S&S Isa and a GIA and some savings. 

Planning on using my LGPS for a few years along with the automatic tax free lump sum and savings before then drawing down the Scottish Widows pension

Thank you

Dazed_and_C0nfused

I have read about the 60k annual allowance, but I just want to be sure that I am not landed with a tax bill if I inadvertently receive more tax relief through the addtional payments I make outside salary sacrifice than income tax i would have paid on my reduced salary.

There is no such rule.  Plenty of people contribute to a SIPP using the relief at source (RAS) method and receive the pension tax relief despite not paying any tax at all.

How much is your employer contributing?  The total of their normal contributions and the extra they are contributing in return for you agreeing to the reduced salary?

What do you expect your P60 to show your taxable pay as for 2023-24?

How much do you want to contribute (the net contribution you will actually hand over)?

huw01

Thank you, my employer is contributing 5%, I am on average contributing around 50% of my salary at the moment through salary sacrifice. I was looking on on contributing around 20k each tax year for the next 4 years to get around 100k added in with the tax relief added.

My salary is in the region gross of 48k per annum gross currently

I think you have answered my question though that I can do the additional contributions of 20k per year in additional to salary sacrifice

Dazed_and_C0nfused

huw01 said:

Thank you, my employer is contributing 5%, I am on average contributing around 50% of my salary at the moment through salary sacrifice. I was looking on on contributing around 20k each tax year for the next 4 years to get around 100k added in with the tax relief added.

My salary is in the region gross of 48k per annum gross currently

I think you have answered my question though that I can do the additional contributions of 20k per year in additional to salary sacrifice

You aren't contributing anything though, you are agreeing to a reduced salary in return for additional employer contributions. 

That is why no pension tax relief is added, as pension tax relief is not due on employer contributions.

So you have total employer contributions of £26,400.

And taxable earnings of £24,000.

And will contribute £16,000 (net) into a RAS scheme. 

You will be within the tax relief limits, for your contributions (£20k gross)

And within the annual allowance for total contributions (£46,400).

Sacrificing salary down to NMW would be slightly more tax efficient though as you will avoid paying NI on the amount sacrificed but there is no NI saving with RAS contributions.

cloud_dog

huw01 said:

I currently contribute into the workplace pension provided by Scottish Widows via salary sacrifice.
I can adjust my monthly payments up and down and take advantage of employer NI contributions savings which also get credited into my pension.

I think I can also contribute directly any extra payments myself and benefit from the 20% tax relief that would get added on top.

My question is as I am paying reduced income tax and NI due to salary sacrifice, does this limit the amount I can make as additional contributions and benefit from the 20% tax relief.

I have read about the 60k annual allowance, but I just want to be sure that I am not landed with a tax bill if I inadvertently receive more tax relief through the addtional payments I make outside salary sacrifice than income tax i would have paid on my reduced salary.

To give some additional context. 51 years old. Also have an lgps pension from a previous employment. I will scrape in due to my DOB to take it at 55 with an automatic lump sum (pre 2008 membership).

Looking at finishing my current job in 4 years, take by LGPS at a reduced rate (about 12k), then leave my scottish widows company pension in for a few years before I touch it, so in the meantime I am trying to build that pot up as much as I can. Also have S&S Isa and a GIA and some savings. 

Planning on using my LGPS for a few years along with the automatic tax free lump sum and savings before then drawing down the Scottish Widows pension

Thank you

With the surplus you appear to have (£20k pa), you should at the very least ensure you are sacrificing down to the National Minimum Wage.  And then any remaining monies could go in via personal contributions if you wish to.

huw01

Thank you all. The comments have been really helpful to me. My aim is to try in the next 4 years is to get the value up to circa 200k. I thing it is nearly dooable, a few tweeks of my salary down to the NMW and keep donig the 20k per year additional contributions should get me there