Back in "employment" - pension options

Connoisseurus_Rex

I've been self employed for years so have been paying into a SIPP that was originally a few old workplace pension pots. Soon I'll be returning to employment but I'm just confused by my options with pensions.

While self employed I was grossing £70k and contributing £1k a month (£1.25k after tax relief). This was also keeping me under the child benefit threshold and more tax efficient thanks to the higher rate tax relief.

At my new job I'll be earning the same and the pension is a standard 5% employee / 3% employer. 

I'm in my 30s so I'm still trying to grow my pension pot(s) - can I simply salary sacrifice more into the workplace pension? If so is salary sacrifice allowed on all workplace pensions? Would this work in the same way as the SIPP in that I'd get additional tax relief (presumably via rebate at the end of the tax year). Or if salary sacrifice isn't possible should I just be contributing the difference into my SIPP?

Thanks all - despite usually being the financially savvy one in my relationship I'm all over the place with this...

Marcon

Connoisseurus_Rex said:

I've been self employed for years so have been paying into a SIPP that was originally a few old workplace pension pots. Soon I'll be returning to employment but I'm just confused by my options with pensions.

While self employed I was grossing £70k and contributing £1k a month (£1.25k after tax relief). This was also keeping me under the child benefit threshold and more tax efficient thanks to the higher rate tax relief.

At my new job I'll be earning the same and the pension is a standard 5% employee / 3% employer. 

I'm in my 30s so I'm still trying to grow my pension pot(s) - can I simply salary sacrifice more into the workplace pension? If so is salary sacrifice allowed on all workplace pensions? Would this work in the same way as the SIPP in that I'd get additional tax relief (presumably via rebate at the end of the tax year). Or if salary sacrifice isn't possible should I just be contributing the difference into my SIPP?

Thanks all - despite usually being the financially savvy one in my relationship I'm all over the place with this...

Salary sacrifice depends on the employer offering it, so check that first. You get an NI saving as well as the same (income) tax benefit, so if you want to contribute more to your workplace scheme and can do so by salary sacrifice, that's better than a 'personal' contribution. There's no tax relief on payments you make by salary sacrifice, because you've never had the money in the first place, so haven't paid any tax on it. Pension contributions by salary sacrifice are classed as employer contributions; employer contributions are always paid gross.

Even if salary sacrifice isn't offered by your new employer, you can probably contribute more to your workplace scheme as a personal contribution.  Whether that's a better option than your SIPP depends on charges, funds on offer etc - but why not find out the facts (especially relating to salary sacrifice) before doing anything else?

Albermarle

Normally you can just ask your employer to increase your % contributions ( whether they operate salary sacrifice or not) . Some employers will only make these changes at certain times of year to save admin. Also if it is salsac you can not reduce your salary lower than the Minimum wage.
Also if you make contributions to your SIPP, you will have to claim back higher rate tax relief.
Most employers either operate salary sacrifice or take contributions before tax, so you get all the tax relief automatically ( by not actually paying any tax on the contributions).

ali_bear

Congratulations on thinking about pensions now in your 30's when you're an above average earner!

There is a handy pensions modeler available for free at Guiide the Happy Retirement Designer you can use this to work out if your pension savings are on the right track. I'm saying this because it is possible to stuff too much money into your pension, when you could be making better use of it now. Having said that the model results depend a lot on the assumptions about investment growth rates etc. 

JoeCrystal

Connoisseurus_Rex said:

At my new job I'll be earning the same and the pension is a standard 5% employee / 3% employer. 

It may be worth checking what it is based on. It may be that your employer uses the legal minimum auto-enrollment, which is only 5% EE and 3% ER on the earnings between £6,240 to £50,270. So, potentially only £293.53 per month or £3,522.40 per year gross overall (EE+ER). Nothing is stopping you from upping your contribution, though even the employer won't match any higher potentially.