AVC-PSE-Mimimum Wage

nilocmac

I have been paying AVCs through payroll for the last number of years.  It has been on the Gross side of my payslip as my company have been using PSE. 

However with the mimimum wage rising it had moved to the net side.  (I think it would work out that I could pay £10 AVC and still be in PSE).  I want to pay £50 or so and am unsure what to do.  Do I lose the tax benefit.  I hope this is clear.  

I will also be taking my age 60 company pension in a number of months and possibly a lump sum.

Marcon

nilocmac said:

I have been paying AVCs through payroll for the last number of years.  It has been on the Gross side of my payslip as my company have been using PSE. 

However with the mimimum wage rising it had moved to the net side.  (I think it would work out that I could pay £10 AVC and still be in PSE).  I want to pay £50 or so and am unsure what to do.  Do I lose the tax benefit.  I hope this is clear.  

I will also be taking my age 60 company pension in a number of months and possibly a lump sum.

You don't lose the (income) tax benefit whether you make a personal contribution or contribute by salary exchange. The advantage of salary exchange is a saving in NI on the amount you sacrifice.

dasherman

nilocmac said:

I have been paying AVCs through payroll for the last number of years.  It has been on the Gross side of my payslip as my company have been using PSE. 

However with the mimimum wage rising it had moved to the net side.  (I think it would work out that I could pay £10 AVC and still be in PSE).  I want to pay £50 or so and am unsure what to do.  Do I lose the tax benefit.  I hope this is clear.  

I will also be taking my age 60 company pension in a number of months and possibly a lump sum.

It sounds like you work for Royal Mail, as their version of salary sacrifice is called Pension Salary Exchange(PSE).

Most posties still get paid weekly, so an easy way to work out the maximum AVC contribution to stay within PSE, is to subtract the rate of the minimum wage from your basic hourly rate and then multiple by your basic hours worked.

For example:

13.50 – 11.44 x 37 = 57.72

Only include your basic pay and not any allowances or overtime and also factor in any payments you make that also potentially benefit from salary sacrifice, such as the Lump Sum Booster or the Partnership & Matching share scheme.

You can pay a higher rate of AVC's if you want to, but if you fall out of PSE you lose that benefit on all qualifying payments.

*The NMW is due to increase from £11.44 to £12.21 in April 2025.

Kernowshep

@dasherman said:

For example:

13.50 – 11.44 x 37 = 57.72

I think you did that calculation with £13.00 not £13.50.
(13.50-11.44)x37=76.22