Do I need to make Bonus Sacrifice decision without knowing value of bonus?

junglemonster

My employer has advised me that I need to decide what percentage of my discretionary bonus, if any, I wish to sacrifice into my pension. The rub is that I need to do this before I know how much I’ll be getting. Apparently this is HMRC rules, but I can’t find any information about it anywhere. Please could someone point me to the rules around this?

Phoenix72

Not a rule I've heard off but your employer can set any rules it wants for something that is at their discretion, i.e. allowing you to salary sacrifice at all.

Marcon

junglemonster said:

My employer has advised me that I need to decide what percentage of my discretionary bonus, if any, I wish to sacrifice into my pension. The rub is that I need to do this before I know how much I’ll be getting. Apparently this is HMRC rules, but I can’t find any information about it anywhere. Please could someone point me to the rules around this?

It isn't. There's nothing to stop the employer notifying you of the expected amount, and you then make your decision before actual payment is made to you. See (eg) https://www.aviva.co.uk/retirement/pension-basics/bonus-pension-sacrifice/

Sounds more like an administrative issue.

artyboy

Yep, load of nonsense, if they choose to administer it that way, that's their prerogative, but they can't blame HMRC.

My first (main) employer did this and it was a double pain because bonuses were paid just before the end of the tax year, so it would have been a planning scramble - I never took them up on it, but then I was never as clued up on pensions back then...

Smudgeismydog

My current employer operates like this, we have to decide how much to sacrifice at the start of the calendar year, and then we are told what the amount is just ahead of the end of March pay run.

I just figured if I took the bonus I would lose 40%, so fully sacrificed. I was also ‘fiddled’ out of bonuses in my previous company, so have regarded it as a bonus, and not a figure I ever banked on receiving.

Novice_investor101

I have to decide whether to sacrifice my bonus before I know how much it’ll be. We can choose a percentage of it to sacrifice though. Next year I’m going back to fully sacrificing back into my pension because my employer increase’s it by 10% (saves the a chunk of employers NICs, I guess). 

Marcon

Novice_investor101 said:

I have to decide whether to sacrifice my bonus before I know how much it’ll be. We can choose a percentage of it to sacrifice though. Next year I’m going back to fully sacrificing back into my pension because my employer increase’s it by 10% (saves the a chunk of employers NICs, I guess). 

It's quite strange that many employers seem unable to cope with those who want to know what their bonus is before deciding whether or not to sacrifice some or all of it. I can see why that might be so for administrative reasons where a bonus is paid close to the end of a tax year, but otherwise it's a bit puzzling. After all, you know what your salary is before deciding whether or not to sacrifice some of that.

Hoenir

Perhaps the pot to be distributed across all employees is dependent upon the Employers NIC liability that's incurred. The less ERS NIC that's due. The greater the net pot to be apportioned. 

westv

junglemonster said:

My employer has advised me that I need to decide what percentage of my discretionary bonus, if any, I wish to sacrifice into my pension. The rub is that I need to do this before I know how much I’ll be getting. Apparently this is HMRC rules, but I can’t find any information about it anywhere. Please could someone point me to the rules around this?

This is exactly how it works at my place. I assumed it was because HR needed to know by a certain date that was before we could officially be informed of the bonus figure.

af1963

If you have flexibility to adjust your regular salary sacrifice during the year, you can sacrifice the whole bonus and then if you decide after hearing the amount that you'd rather receive (say) £500 of it as (taxable) pay, you can sacrifice less for a month or two.

Can see where there might be problems the bonus is paid very near the end of the tax year, and you are going to be close to the maximum allowed pension contributions - you might accidentally pay in more than the annual allowance.  But if it's done earlier in the tax year there should be time to fix things.

Veteransaver

Often the issue is that they need get it sacrificed by payroll in the month it is paid, but don't announce it till close to or after payroll date. Some firm allows you to specify a % amount, or a fixed amount. Eg if you think you'll be getting £2k, you can say you want to sacrifice £1k. If you only actually get £750 then all of it is sacrificed