Difference between AVC and SCAVCs (shared cost AVCs/Salary Sacrifice) - LGPS linked?

daveyjp

Dazed_and_C0nfused said:

lastbigspender said:

Dazed_and_C0nfused said:

lastbigspender said:

So if I was to setup a SCAVC for £100 p/m it says I will pay £72.08 - is £72.08 the amount that will be taken from my gross pay or net pay?

Plus does the employer make up the differnece?

Assuming the employer isn't contributing any of their NI savings the only way you can get £100 into a pension using salary sacrifice is to agree to give up £100 of your salary.

But if you are a basic rate taxpayer (on at least £100 of your income) you would avoid paying tax and NI on that £100.

The tax saving is £20 and NI £8 so the real cost in lost take home pay is £72.

So I would be £72 less in my net income?

Yes, you sacrifice £100 of salary and your employer adds that to your pension (as an employer contribution so no tax relief gets added).

But your payslip shows you are earning £100 less so there is no tax or NI payable on that £100.  If there had been tax and NI payable you would have paid 20% tax (£20) and 8% NI (£8) so only receiving £72 in net take home pay.

All this is based on you being a basic rate payer always earning at least £100/month more than the standard tax and NI thresholds (~£1,048/month).

As it is 'shared cost' the contributions under LGPS are £99 employer, £1 employee.  With £100 paid in you do indeed only see a reduction in net salary of £72.

joseph80

Just to add, your pension (final salary or CARE) is calculated on your full salary (before the reduction in salary). 

MX5huggy

lastbigspender said:

Dazed_and_C0nfused said:

lastbigspender said:

So if I was to setup a SCAVC for £100 p/m it says I will pay £72.08 - is £72.08 the amount that will be taken from my gross pay or net pay?

Plus does the employer make up the differnece?

Assuming the employer isn't contributing any of their NI savings the only way you can get £100 into a pension using salary sacrifice is to agree to give up £100 of your salary.

But if you are a basic rate taxpayer (on at least £100 of your income) you would avoid paying tax and NI on that £100.

The tax saving is £20 and NI £8 so the real cost in lost take home pay is £72.

So I would be £72 less in my net income?

Do you have student loan repayments? The Salary Sacrifice also reduces these, typically 9% so £100 salary sacrifice costs you just £64 in lost take home pay. 

Your student loan will be paid off slower but my aim is to never pay it off and get it wiped when I get old enough.