salary sacrifice VS contribution to work base pension

Mary_Alice

Can someone please explain in simple terms what the  difference is. I was auto enrolled to a work based pension and have been adding an extra 6% . so I pay 4% mandatory plus the extra 6% and the company pay 5%. I am a basic tax payer. The company are changing from this set up to salary sacrifice. It looks like I will pay in the same , but will get £40 extra in my take home pay if I opt for the salary sacrifice. However my contract will change so my annual salary will be lower on my new contract. I just don't understand it. Are there any drawbacks to this. I work full time and don't claim any benefits etc 
Thanks in advance 

Dazed_and_C0nfused

Salary sacrifice is usually the most tax efficient way to get money into a pension.  This is because you avoid paying both tax and NI on the amount sacrificed.

And some employers chip in the NI saving they benefit from.

Where it is less favourable is for people with very low income who wouldn't be paying tax or NI in the first place.

As you work full time and NMW rules have to be adhered to after you won't fall foul of the low income situation, you will presumably still be earning ~£20k+ after the sacrifice?

Marcon

Mary_Alice said:

Can someone please explain in simple terms what the  difference is. I was auto enrolled to a work based pension and have been adding an extra 6% . so I pay 4% mandatory plus the extra 6% and the company pay 5%. I am a basic tax payer. The company are changing from this set up to salary sacrifice. It looks like I will pay in the same , but will get £40 extra in my take home pay if I opt for the salary sacrifice. However my contract will change so my annual salary will be lower on my new contract. I just don't understand it. Are there any drawbacks to this. I work full time and don't claim any benefits etc 
Thanks in advance 

Usually the only drawback is when an employee doesn't understand it and thinks something fishy is going on - it isn't. There are endless threads on this topic if you use the search function (top right on the green bar above - the little magnifiying icon next to the bell) and enter 'salary sacrifice'.

Mary_Alice

Dazed_and_C0nfused said:

Salary sacrifice is usually the most tax efficient way to get money into a pension.  This is because you avoid paying both tax and NI on the amount sacrificed.

And some employers chip in the NI saving they benefit from.

Where it is less favourable is for people with very low income who wouldn't be paying tax or NI in the first place.

As you work full time and NMW rules have to be adhered to after you won't fall foul of the low income situation, you will presumably still be earning ~£20k+ after the sacrifice?

Yes my salary will still be £28,300 after the change of contract. 

MX5huggy

Salary sacrifice is a real boom especially for basic rate tax payers who pay 8% NI where as those on the higher rate pay 2% NI. Fill your boots (or your pension) maybe up the contributions so you don’t get that extra £40 in your pocket but about £52 in your pension. 

Do you pay student loan? Because payments are also reduced by Salary Sacrifice.