Pay rise or increased pension contributions?

fernando_vaz

I'm expecting to be offered a pay increase shortly, but wondered if it make more sense for both me and my employer, for me to ask for an increase in employer pension contributions rather than a salary increase.

I really have very little knowledge of pensions and how they work, so any advice would be appreciated.

My annual salary is £52,000. I am expecting it to increase around 5% to £54,600.

I contribute £600 a month to my pension. 

My employer currently contributes 5% (of all earnings). 

I would like reduce any higher rate tax where possible for myself, and if something could be done to benefit my employer too (eg. they pay less NI contributions), I would be interested to know. 

Marcon

fernando_vaz said:

I'm expecting to be offered a pay increase shortly, but wondered if it make more sense for both me and my employer, for me to ask for an increase in employer pension contributions rather than a salary increase.

I really have very little knowledge of pensions and how they work, so any advice would be appreciated.

My annual salary is £52,000. I am expecting it to increase around 5% to £54,600.

I contribute £600 a month to my pension. 

My employer currently contributes 5% (of all earnings). 

I would like reduce any higher rate tax where possible for myself, and if something could be done to benefit my employer too (eg. they pay less NI contributions), I would be interested to know. 

It sounds as if your employer might not be operating salary sacrifice in respect of pension contributions. Do you know if that's the case?See https://www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot/salary-sacrifice-and-your-pension

If so, accept the payrise graciously(!) and suggest they introduce salary sacrifice, which will save you and the employer NI contributions. If they already offer salary sacrifice, accept the pay rise and then ask to sacrifice more than you are currently sacrificing.

You'll get the same income tax saving whether your contributions are made personally (by deductions from your pay) or by salary sacrifice. 

Kernowshep

fernando_vaz said:

My annual salary is £52,000. I am expecting it to increase around 5% to £54,600.

I contribute £600 a month to my pension. 

My employer currently contributes 5% (of all earnings). 

I would like reduce any higher rate tax where possible for myself.

I don't think you will be paying higher rate tax if you are contributing £7,200 p.a. into your pension on a £54,600 gross salary (unless you have other taxable income of more than £2850 or so).

Dazed_and_C0nfused

fernando_vaz said:

I'm expecting to be offered a pay increase shortly, but wondered if it make more sense for both me and my employer, for me to ask for an increase in employer pension contributions rather than a salary increase.

I really have very little knowledge of pensions and how they work, so any advice would be appreciated.

My annual salary is £52,000. I am expecting it to increase around 5% to £54,600.

I contribute £600 a month to my pension. 

My employer currently contributes 5% (of all earnings). 

I would like reduce any higher rate tax where possible for myself, and if something could be done to benefit my employer too (eg. they pay less NI contributions), I would be interested to know. 

Are you Scottish resident for tax purposes?

sg1000

Might be if OP is in Scotland...40% tax rate kicks in at £43662

Cobbler_tone

Depends on your final taxable income, i.e. taxable benefits, other tax breaks. 

I’d say higher unlikely they will uplift their contributions but hopefully you can to stay below the 40% bracket if that’s an issue and your motivation. I ride below that line.

fernando_vaz

Dazed_and_C0nfused said:

fernando_vaz said:

I'm expecting to be offered a pay increase shortly, but wondered if it make more sense for both me and my employer, for me to ask for an increase in employer pension contributions rather than a salary increase.

I really have very little knowledge of pensions and how they work, so any advice would be appreciated.

My annual salary is £52,000. I am expecting it to increase around 5% to £54,600.

I contribute £600 a month to my pension. 

My employer currently contributes 5% (of all earnings). 

I would like reduce any higher rate tax where possible for myself, and if something could be done to benefit my employer too (eg. they pay less NI contributions), I would be interested to know. 

Are you Scottish resident for tax purposes?

No, English.

fernando_vaz

Kernowshep said:

fernando_vaz said:

My annual salary is £52,000. I am expecting it to increase around 5% to £54,600.

I contribute £600 a month to my pension. 

My employer currently contributes 5% (of all earnings). 

I would like reduce any higher rate tax where possible for myself.

I don't think you will be paying higher rate tax if you are contributing £7,200 p.a. into your pension on a £54,600 gross salary (unless you have other taxable income of more than £2850 or so).

That makes sense. Thanks