Increasing pension contributions on part time wage

elsa1611

I am trying to work out the best way to increase pension contributions for my husband who has just gone part time and now only works 23 hours per week and gross pay is £300. The pension scheme is SMART salary sacrifice through Tesco but my thinking is he will not qualify for that now as below NMW so I am presuming it will just be a standard pension where they pay in 7.5% and my husbands contribution on top.

He also pays £50 per week into a SAYE so I am trying to work out what percentage he can increase his pension to so he still has enough to pay SAYE and the rest goes into his pension.

So if he increases his contribution to 100% then £300 (inc £60 tax relief) goes into the pension plus £22.50 from Tesco so will that leave £60 in wages to cover a little bit of tax/NI and the SAYE payment. One thing which is confusing me is that means he will have paid more into his pension that he has earned or do the employers contribution not count.

Am I correct in my working out or have I missed something out like the tax relief gets taken out later so in effect his wages would be zero so could not pay the SAYE payment then.

Simon11

If he is only earning the money that you state above, he would be better off doing the bare min with the Tesco pension to earn the amount that Tesco put in and take the rest as salary to benefit from 0% or 20% income tax.

If you do have spare money, put it away in an ISA Stocks and Shares which should hopefully performance as well as a pension plus gives you more freedom to take the money whenever you want.

This is based on the limited information above, and assuming that you have low savings/ pension pots?

Marcon

elsa1611 said:

I am trying to work out the best way to increase pension contributions for my husband who has just gone part time and now only works 23 hours per week and gross pay is £300. The pension scheme is SMART salary sacrifice through Tesco but my thinking is he will not qualify for that now as below NMW so I am presuming it will just be a standard pension where they pay in 7.5% and my husbands contribution on top.

He also pays £50 per week into a SAYE so I am trying to work out what percentage he can increase his pension to so he still has enough to pay SAYE and the rest goes into his pension.

So if he increases his contribution to 100% then £300 (inc £60 tax relief) goes into the pension plus £22.50 from Tesco so will that leave £60 in wages to cover a little bit of tax/NI and the SAYE payment. One thing which is confusing me is that means he will have paid more into his pension that he has earned or do the employers contribution not count.

Am I correct in my working out or have I missed something out like the tax relief gets taken out later so in effect his wages would be zero so could not pay the SAYE payment then.

Now that circumstances have changed, you might consider revisiting the marriage allowance you've currently passed to your husband: https://forums.moneysavingexpert.com/discussion/6559105/working-out-tax-free-amount-i-can-take-each-year-from-my-pension#latest

Maybe consider 'keeping' it depending on how much (potentially taxable) cash you want to withdraw from your pension?

Sam_666

Based on minimal info provided, your husband can contribute to work SMART pension at £36 p/w. That is amount that is above min wage limit. Who told you he cant use SMART?
You would have to revisit figures from April, as min wage limits go up. Min wage is calculate per hour, not per week.

If he works all 52 weeks in year, he'll earn £13676 (after contributing £36 p/w to Smart). So, he can contribute in SIPP up to £10940 (80% from £13676). HMRC will add up 20%.

elsa1611

Sam_666 said:

Based on minimal info provided, your husband can contribute to work SMART pension at £36 p/w. That is amount that is above min wage limit. Who told you he cant use SMART?
You would have to revisit figures from April, as min wage limits go up. Min wage is calculate per hour, not per week.

If he works all 52 weeks in year, he'll earn £13676 (after contributing £36 p/w to Smart). So, he can contribute in SIPP up to £10940 (80% from £13676). HMRC will add up 20%.

Thanks for the workout, the reason I thought he could not use SMART as a couple of times recently he has not worked his full hours and they have then opted him out of SMART and paid into the pension as a normal workplace pension as he has been under minium wage, a letter comes through the post explaining this and when you look at the statement it shows their contribution and his contribution separately.

So of your calculation he could put in maximum £210.38 so basically 70% of his wage which should just leave enough to cover the £50 per week for SAYE 

Marcon

Sam_666 said:

Based on minimal info provided, your husband can contribute to work SMART pension at £36 p/w. That is amount that is above min wage limit. Who told you he cant use SMART?
You would have to revisit figures from April, as min wage limits go up. Min wage is calculate per hour, not per week.

If he works all 52 weeks in year, he'll earn £13676 (after contributing £36 p/w to Smart). So, he can contribute in SIPP up to £10940 (80% from £13676). HMRC will add up 20%.

Why does he need a SIPP? Surely it's easier to make personal contributions to his employer pension (OP has said above that his employer can handle it when his working hours take him below minimum wage, so the scheme and employer must be capable of handling 'true' personal contributions) - minimum wage considerations only apply to contributions made by salary sacrifice.