Salary sacrifice out of higher tax

Nurse2047

Can anyone please advise if my thinking is correct?

Current nurse in NHS however moving to private sector, age now 46. 
Big salary rise to £60k
Employer pay 5% and I pay 3% into their pension scheme NOW pensions, no negotiation on this apparently.
They offer salary sacrifice and say they will do this into my own SIPP.
Would it be advisable to SS to £50k to reduce higher tax rate? 

Dazed_and_C0nfused

Nurse2047 said:

Can anyone please advise if my thinking is correct?

Current nurse in NHS however moving to private sector, age now 46. 
Big salary rise to £60k
Employer pay 5% and I pay 3% into their pension scheme NOW pensions, no negotiation on this apparently.
They offer salary sacrifice and say they will do this into my own SIPP.
Would it be advisable to SS to £50k to reduce higher tax rate? 

It would be tax efficient to reduce higher rate tax.

And savings for your retirement is usually a good thing as well.

You probably need to check with your SIPP provider that they can accept employer contributions.

penners324

Can you survive on the lower take home pay if you sal sac to £50k?

If so then yes, definitely worth it

Aylesbury_Duck

Have you checked that the big headline salary rise is actually an increase in total remuneration?   It may be that the overall value of your NHS salary and pension is greater than that of the private alternative.   

I've seen colleagues leave local authority employment for a better salary, but they're actually worse off in the grand scheme of things because they've left behind an index-linked defined benefit LGPS and moved to a company that puts 3% into a scheme.  Some need the higher salary, of course, to secure a mortgage or for cost of living, but it's worth doing the sums before being seduced by a headline salary.

crv1963

Aylesbury_Duck said:

Have you checked that the big headline salary rise is actually an increase in total remuneration?   It may be that the overall value of your NHS salary and pension is greater than that of the private alternative.   

I've seen colleagues leave local authority employment for a better salary, but they're actually worse off in the grand scheme of things because they've left behind an index-linked defined benefit LGPS and moved to a company that puts 3% into a scheme.  Some need the higher salary, of course, to secure a mortgage or for cost of living, but it's worth doing the sums before being seduced by a headline salary.

This something that I also have seen. Work the maths out before moving roles, if currently NHS employment then you are getting 1/54th of your salary promised to you on retirement, each and every year, index linked. Plus the other benefits - six months full pay, six months half pay in the event of sickness, two times salary as death benefit- a form of life insurance.

60k pa salary sacrifice down to 50k to avoid HR tax is certainly doable, however look at the whole package on offer. Is this move a permanent one or a career move with planned return to NHS at a future date? If a return to NHS likely make sure you re-join the pension scheme.

Good luck whatever you decide.

Marcon

Nurse2047 said:

Can anyone please advise if my thinking is correct?

Current nurse in NHS however moving to private sector, age now 46. 
Big salary rise to £60k
Employer pay 5% and I pay 3% into their pension scheme NOW pensions, no negotiation on this apparently.
They offer salary sacrifice and say they will do this into my own SIPP.
Would it be advisable to SS to £50k to reduce higher tax rate? 

Big salary rise, massive cut in pension.

Whether it is 'advisable' to SS depends on what you are trying to achieve - but given the huge hit your future pension has just taken, you certainly need to consider doing something fairly radical in terms of upping your own contributions, and SS is a better bet than personal contributions (because of the NI saving - the income tax saving stays the same).

SacredStephan

Nurse2047 said:

Employer pay 5% and I pay 3% into their pension scheme NOW pensions, no negotiation on this apparently. 

Are you sure? The usual minimum is employer pays 3% and employee pays 4% and 1% added as tax relief.

SacredStephan

crv1963 said:

This something that I also have seen. Work the maths out before moving roles, if currently NHS employment then you are getting 1/54th of your salary promised to you on retirement, each and every year, index linked. Plus the other benefits - six months full pay, six months half pay in the event of sickness, two times salary as death benefit- a form of life insurance.

And a survivor's pension for your spouse or partner if you pre-decease them.

crv1963

SacredStephan said:

crv1963 said:

This something that I also have seen. Work the maths out before moving roles, if currently NHS employment then you are getting 1/54th of your salary promised to you on retirement, each and every year, index linked. Plus the other benefits - six months full pay, six months half pay in the event of sickness, two times salary as death benefit- a form of life insurance.

And a survivor's pension for your spouse or partner if you pre-decease them.

SacredStephan- which is part of the reason why I am buying additional pension, i) reduces HR tax now, ii) increases pension when I get it and iii) gives my wife (who has a much poorer pension provision being all DC) an improved survivors pension which is of course DB.

Grumpy_chap

Marcon said:

Big salary rise, massive cut in pension.

Indeed, my wife worked for the NHS in a junior admin role before she chose to do something else.
Now we are reaching the point that knowing about retirement is becoming relevant to us, I find it amazing how much retirement income she will be bringing in and how practically impossible it is for my various collection of DC pensions to have sufficient funding to yield similarly.

Grumpy_chap

crv1963 said:

SacredStephan said:

crv1963 said:

This something that I also have seen. Work the maths out before moving roles, if currently NHS employment then you are getting 1/54th of your salary promised to you on retirement, each and every year, index linked. Plus the other benefits - six months full pay, six months half pay in the event of sickness, two times salary as death benefit- a form of life insurance.

And a survivor's pension for your spouse or partner if you pre-decease them.

SacredStephan- which is part of the reason why I am buying additional pension, i) reduces HR tax now, ii) increases pension when I get it and iii) gives my wife (who has a much poorer pension provision being all DC) an improved survivors pension which is of course DB.

I thought the proposal was to SS into SIPP from the new employment (private sector), not buying additional NHS pension now?
SS into the SSIP won't typically guarantee survivors pension for spouse.
The value of the NHS pension is shockingly good.