Salary Sacrifice - what would be the maximum

Random47

I understand the Annual Allowance of £60K. I get that includes personal and employer contributions are included when calculating how much you have saved into a pension. What I am not fully clear on is salary sacrifice contributions impacts. Are they consider employer contributions so not impacted in count towards AA or if they are they do not contribute to the pension contributions being greater than gross annual salary.

Scenario: (based on LGPF member & figures rounded to closet full percent etc)
Currently say an annual salary of £75K net. From that  8% (6K) pension with employer contributing 19% (£14250). Plus a salary sacrifice £15K pa to an AVC. (Also salary sacrifice £6K pa for lease car.)
Is this correct that: maximum pension contributions for the year are 6000+14250+15000= 35250

Ideally I want to increase SS AVC to £39K for 2025-26 year. Is this possible without exceeding the £60K AA

QrizB

With salary sacrifice, you accept a lower salary in exchange for your employer promising to make payments into your pension (or giving you use of a car).

It's your employer's money, and they're employer contributions.

Not employee ones.

Dazed_and_C0nfused

Random47 said:

I understand the Annual Allowance of £60K. I get that includes personal and employer contributions are included when calculating how much you have saved into a pension. What I am not fully clear on is salary sacrifice contributions impacts. Are they consider employer contributions so not impacted in count towards AA or if they are they do not contribute to the pension contributions being greater than gross annual salary.

Scenario: (based on LGPF member & figures rounded to closet full percent etc)
Currently say an annual salary of £75K net. From that  8% (6K) pension with employer contributing 19% (£14250). Plus a salary sacrifice £15K pa to an AVC. (Also salary sacrifice £6K pa for lease car.)
Is this correct that: maximum pension contributions for the year are 6000+14250+15000= 35250

Ideally I want to increase SS AVC to £39K for 2025-26 year. Is this possible without exceeding the £60K AA

To be honest I'm not sure you do.

Salary sacrifice is where you agree to a reduced salary in return for additional employer contributions.  That is why no pension tax relief is added, none is due on employer contributions.

Employer contributions to a DC pension are included when calculating how much of your annual allowance has been used.

Are you in the LGPS?  If so that is a defined benefit scheme and your contributions (and the employer contributions for the DB scheme) are of no relevance for annual allowance purposes.  You need to know the pension input amount, a sometimes complicated value relating to the increase in value of your DB pension.

You need to look at the total of the PIA (for any DB pensions) and contributions* to any DC schemes

*your contributions, any employer contributions and any basic rate tax relief added by the pension company

Random47

Yes DB LGPS. I do realise SS is at source so no need for tax relief.
I understand (or not) that the CARE (1/49th) increase per annum is multiplied by 16 to give you the equivalent AA count as a rough estimate.
so 1/49th of £75K = £1530 pa pension accrued x 16 = £24490 towards equivalent AA,
so residual available AA via an AVC pay in with SS would be £60000-£24490 = £35510 (y/n)

Dazed_and_C0nfused

Random47 said:

Yes DB LGPS. I do realise SS is at source so no need for tax relief.
I understand (or not) that the CARE (1/49th) increase per annum is multiplied by 16 to give you the equivalent AA count as a rough estimate.
so 1/49th of £75K = £1530 pa pension accrued x 16 = £24490 towards equivalent AA,
so residual available AA via an AVC pay in with SS would be £60000-£24490 = £35510 (y/n)

I don't think it's quite that simple.

Random47

Dazed_and_C0nfused said:

I don't think it's quite that simple.

nothing is, but its a rough guide I suppose

cloud_dog

For the PIA calculation you will need to know your salary on 5 April, are you able to know that, e.g. might there be pay rises towards April?

MX5huggy

PIA is an almost impossible calculation to do in a timely way for LGPS. You don’t have the information. Do you have any pre 2014 LGPS? It includes the increase in value of the previously accumulated pension for post 2014 that’s CPI for pre it’s based on your salary if you get a pay rise going up the scales that’s one number but then the April pay rise is historically agreed by the unions by the following November. 

You need to your PIA from previous year off your LGPS statement and guess it will or won’t be significantly different next year. 

AlanP_2

Best calculator I have found for LGPS PIA is this one:

https://www.lgpsmember.org/help-and-support/tools-and-calculators/annual-allowance-quick-check-tool/

Its one of a number of potentially useful calculators on that site.

Random47

MX5huggy said:

..Do you have any pre 2014 LGPS? It includes the increase in value of the previously accumulated pension for post 2014...

Good point and often forgotten about.

After consideration I am moving toward keeping increased SS AVC to £30K for 2025-26 that way I am fairly certain with PIA on Final Salary DB and CARE elements increase will cumulatively be under the equivalent £60K AA.

Cheers

Beamish1973

I earn 30,237.72 and am considering a salary sacrifice for a car which equates to £362.00 per month salary sacrifice.  I can't do the calculations (because I'm rubbish at maths lol) and don't understand the tax and NI bit but on a monthly basis will this bring my income under the minimum wage ?