Salary sacrifice versus sate pension

asdfgqwzx

I will be 66 in July,  but intend to continue working ( ideally until 70). I could defer my state pension, but am unlikely to earn sufficient gains by defering and if I take it will enter the 40% tax bracket.
Can I salary sacrifice the value of state pension £11.5K into my works auto enrolled pension and claim my state pension, which would effectively mean i take home roughly the same amount ( slight gain as I understand i will no longer be paying any NI)?

Triumph13

As long as you haven't already taken some taxable income from a DC pension (which drops your future maximum contributions to £10k pa) you can contribute up to 100% of your salary into a pension scheme.  The fact you are receiving state pension makes no difference to this.

Note that, unless your employer shares their own NI savings with you, salary sacrifice will be no better than any other type of pension contribution as you won't be paying NI on your salary.  

Have you thought about going half-and-half rather than all one way or the other?  Would it be attractive to defer for two years for an 11.6% boost then claim and up your pension contributions for your final two years? 

artyboy

Triumph13 said:

As long as you haven't already taken some taxable income from a DC pension (which drops your future maximum contributions to £10k pa) you can contribute up to 100% of your salary into a pension scheme.  The fact you are receiving state pension makes no difference to this.

Note that, unless your employer shares their own NI savings with you, salary sacrifice will be no better than any other type of pension contribution as you won't be paying NI on your salary.  

Have you thought about going half-and-half rather than all one way or the other?  Would it be attractive to defer for two years for an 11.6% boost then claim and up your pension contributions for your final two years? 

The company may provide some level of matching contributions to the salary being sacrificed - so it may still be a better option than paying into a separate private pension...

lisyloo

Triumph13 said:

As long as you haven't already taken some taxable income from a DC pension (which drops your future maximum contributions to £10k pa) you can contribute up to 100% of your salary into a pension scheme.  The fact you are receiving state pension makes no difference to this.

Note that, unless your employer shares their own NI savings with you, salary sacrifice will be no better than any other type of pension contribution as you won't be paying NI on your salary.  

Have you thought about going half-and-half rather than all one way or the other?  Would it be attractive to defer for two years for an 11.6% boost then claim and up your pension contributions for your final two years? 

Doesn't minimum wage legislation apply?
So employer has to pay min wage in money (not benefits).

MallyGirl

it does for sal sac but you can contribute the rest to another pension scheme

Marcon

Triumph13 said:

As long as you haven't already taken some taxable income from a DC pension (which drops your future maximum contributions to £10k pa) you can contribute up to 100% of your salary into a pension scheme.  

Be aware that you don't actually pay in 100% yourself. You would pay in 80% and the provider would claim basic rate tax relief on your behalf and add that to your 'pot'. 

You can't salary sacrifice below minimum wage, though, as others have already pointed out; it would need to be a 'personal' contribution actually paid by you.

asdfgqwzx

Thanks guys really helpful, As i have already taken some funds to pay off the mortgage, I am limited to 10k pension contributions before tax, but by salary sacrifice would only be taxed at 20% on over 10k contributions and not 40% if I just took pension on top of full salary. If my understanding is correct?

MallyGirl

I don't understand what you have said there. If you have invoked MPAA then you are limited to £10K contributions so you can just Sal sac £10K (assuming your employer doesn't give you any of their employer NI savings)

Triumph13

I'm afraid your understanding is not correct and you have shot yourself in the foot by triggering the MPAA by taking taxable funds.

Anything you, or your employer, contributes over the £10k MPAA is just added back to your taxable income.  So you would end up paying 40% tax on it AND getting taxed again when you withdrew it from the pension.