Topping up workplace pension

GlasgowExpat2

I want to make a one-off lump payment to my workplace pension to the maximum amount. 

My salary is £30k and my projected 2024-25 salary sacrifice contributions are £4,134. How do I calculate how much more I can pay into my pension?

El_Torro

The first thing to calculate is what your income is. Is it £25,866? i.e. £30k minus £4,134. Remember that your salary sacrifice contributions are not paid in by you but by your employer. 

Assuming your income is £25,866 you can pay in £20,692.80. Your pension provider will claim £5,173.20 of tax relief and pay that into your pension. 

It's more tax efficient to up your salary sacrifice pension contributions rather than make a manual payment. However your employer has to pay you at least minimum wage, so you can only sacrifice so much.

In order to get tax relief you can only pay in your earnings for that year into a pension, not more.

Marcon

GlasgowExpat2 said:

I want to make a one-off lump payment to my workplace pension to the maximum amount. 

My salary is £30k and my projected 2024-25 salary sacrifice contributions are £4,134. How do I calculate how much more I can pay into my pension?

Beware making a one-off 'maximum lump payment' too early in the tax year. If for any reason your earnings aren't as anticipated (eg you lose your job), you could end up paying in more than the tax relievable amount, which can be a right pain to unscramble!

GlasgowExpat2

El_Torro said:

The first thing to calculate is what your income is. Is it £25,866? i.e. £30k minus £4,134. Remember that your salary sacrifice contributions are not paid in by you but by your employer. 

Assuming your income is £25,866 you can pay in £20,692.80. Your pension provider will claim £5,173.20 of tax relief and pay that into your pension. 

It's more tax efficient to up your salary sacrifice pension contributions rather than make a manual payment. However your employer has to pay you at least minimum wage, so you can only sacrifice so much.

In order to get tax relief you can only pay in your earnings for that year into a pension, not more.

My payslip doesn’t show my salary after the pension deduction. I contribute 10% and my employer 3%.  

I know, but as the NMW is approx £22,308 it’s not a big saving 

GlasgowExpat2

Marcon said:

GlasgowExpat2 said:

I want to make a one-off lump payment to my workplace pension to the maximum amount. 

My salary is £30k and my projected 2024-25 salary sacrifice contributions are £4,134. How do I calculate how much more I can pay into my pension?

Beware making a one-off 'maximum lump payment' too early in the tax year. If for any reason your earnings aren't as anticipated (eg you lose your job), you could end up paying in more than the tax relievable amount, which can be a right pain to unscramble!

Would it be better to make a one-off payment for the year to date (7 months) then?

Marcon

GlasgowExpat2 said:

Marcon said:

GlasgowExpat2 said:

I want to make a one-off lump payment to my workplace pension to the maximum amount. 

My salary is £30k and my projected 2024-25 salary sacrifice contributions are £4,134. How do I calculate how much more I can pay into my pension?

Beware making a one-off 'maximum lump payment' too early in the tax year. If for any reason your earnings aren't as anticipated (eg you lose your job), you could end up paying in more than the tax relievable amount, which can be a right pain to unscramble!

Would it be better to make a one-off payment for the year to date (7 months) then?

If you're trying to avoid the risk of paying too much, then perhaps one payment now and a second just before the end of the tax year would get your round that possibility? 

GlasgowExpat2

Monthly gross pay is £2685.17, pension contribution £349.07 (EE £268.52, ER £80.57). I calculate I can pay an additional £1869 into my pension pot (£2685.17 - £349.07) x 80%. Is that correct?

FIREDreamer

GlasgowExpat2 said:

Monthly gross pay is £2685.17, pension contribution £349.07 (EE £268.52, ER £80.57). I calculate I can pay an additional £1869 into my pension pot (£2685.17 - £349.07) x 80%. Is that correct?

As it’s well under £60,000 I believe you dont need to deduct the ER figure in your calc so you can pay £80.57 more gross as an EE contribution. 

Linton

GlasgowExpat2 said:

Monthly gross pay is £2685.17, pension contribution £349.07 (EE £268.52, ER £80.57). I calculate I can pay an additional £1869 into my pension pot (£2685.17 - £349.07) x 80%. Is that correct?

1) There may be some confusion. "You" do not pay salary sacrificed money into a pension.  You agree to reduce your gross income and the employer agrees that they will put more money into your pension.  If you are currently making no actual pension contributions you can pay your full gross income into a pension.  But if your pension is being paid by SS you cannot take your then gross income to below NMW.

So is your gross pay actually £2685.17/month=£32K. and the SS extra or is the SS included? Is the extra pension being paid through SS?

@El_Torro made much the same point but I dont see a clear answer.

2) The NMW check is made on each pay period, eg if you are paid monthly then it is the monthly NMW that counts  So you cant make a large one-off lump sum payment through SS.

What is EE/ER?

Dazed_and_C0nfused

Linton said:

GlasgowExpat2 said:

Monthly gross pay is £2685.17, pension contribution £349.07 (EE £268.52, ER £80.57). I calculate I can pay an additional £1869 into my pension pot (£2685.17 - £349.07) x 80%. Is that correct?

1) There may be some confusion. "You" do not pay salary sacrificed money into a pension.  You agree to reduce your gross income and the employer agrees that they will put more money into your pension.  If you are currently making no actual pension contributions you can pay your full gross income into a pension.  But if your pension is being paid by SS you cannot take your then gross income to below NMW.

So is your gross pay actually £2685.17/month=£32K. and the SS extra or is the SS included? Is the extra pension being paid through SS?

@El_Torro made much the same point but I dont see a clear answer.

2) The NMW check is made on each pay period, eg if you are paid monthly then it is the monthly NMW that counts  So you cant make a large one-off lump sum payment through SS.

What is EE/ER?

Employee and employer.

Agree the op does seem confused as to the method being used.  There wouldn't be any pension tax relief added from salary sacrifice.

GlasgowExpat2

Linton said:

GlasgowExpat2 said:

Monthly gross pay is £2685.17, pension contribution £349.07 (EE £268.52, ER £80.57). I calculate I can pay an additional £1869 into my pension pot (£2685.17 - £349.07) x 80%. Is that correct?

1) There may be some confusion. "You" do not pay salary sacrificed money into a pension.  You agree to reduce your gross income and the employer agrees that they will put more money into your pension.  If you are currently making no actual pension contributions you can pay your full gross income into a pension.  But if your pension is being paid by SS you cannot take your then gross income to below NMW.

So is your gross pay actually £2685.17/month=£32K. and the SS extra or is the SS included? Is the extra pension being paid through SS?

@El_Torro made much the same point but I dont see a clear answer.

2) The NMW check is made on each pay period, eg if you are paid monthly then it is the monthly NMW that counts  So you cant make a large one-off lump sum payment through SS.

What is EE/ER?

I understand the rules regarding salary sacrifice and that I can’t go below the minimum wage. However I want to make a lump sum payment to my pension pot each month for the maximum amount possible

£2685.17 is before the SS. EE/ER is employee/employer though I know it’s an employer pension contribution.