Nervous about starting salary sacrafice.

micklesthwaite

Thanks for the advice everyone.

To answer a couple of questions:

The company doesn't offer any salary sacrifice. It is a small company, only 5 employees.

At the moment we have the auto-enrolled scheme with Nest, where the company pays in 3% and the employee pays in 5%. Obviously this amount on a salary of just under 50k doesn't amount to much.

I'd like to add 1000 a month and it seems like salary sacrifice is a good option for both them and me. The company saves the NI and so do I (as I understand it). Maybe the company might contribute a bit more since they save the NI contribution too, we'll see.

The thing is, I need to go to the accountant with the information in order for him to do the extra work, but I'm sure he would be prepared to do it if I can be clear what I want to do.

I could probably increase my contributions to the existing Nest plan, but I wouldn't save the NI and neither would the company and it strikes me as daft to pay NI on contributions if there's a way not to.

I know that a pension fund is invested, but not really sure how I would go about choosing a pension provider which offers more than inflation, so the pot doesn't lose real-terms value. Where does one look to find a large reliable provider offering a decent peformance?

From the above, am I looking at this the right way or is my understanding fundamentally wrong in some way?

I'm 57 by the way.

Very much appreciate the advice and time taken to respond.

molerat

I'd like to add 1000 a month and it seems like salary sacrifice is a good option for both them and me.

Salary sacrifice is not you adding to your pension, it is you agreeing to reduce your pay and the company adding to the pension.  You cannot sacrifice your pay below minimum wage, have you taken that into account, and for a small company the extra admin may be too much effort.

Marcon

micklesthwaite said:

Thanks for the advice everyone.

To answer a couple of questions:

The company doesn't offer any salary sacrifice. It is a small company, only 5 employees.

At the moment we have the auto-enrolled scheme with Nest, where the company pays in 3% and the employee pays in 5%. Obviously this amount on a salary of just under 50k doesn't amount to much.

I'd like to add 1000 a month and it seems like salary sacrifice is a good option for both them and me. The company saves the NI and so do I (as I understand it). Maybe the company might contribute a bit more since they save the NI contribution too, we'll see.

The thing is, I need to go to the accountant with the information in order for him to do the extra work, but I'm sure he would be prepared to do it if I can be clear what I want to do.

I could probably increase my contributions to the existing Nest plan, but I wouldn't save the NI and neither would the company and it strikes me as daft to pay NI on contributions if there's a way not to.

Suggest you refer the company's accountant to this: https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye or https://www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot/salary-sacrifice-and-your-pension rather than trying to explain something you don't (yet) fully grasp yourself, although you've certainly clocked the most important bit about NI!

The problem you may encounter is that there is currently a lot of noise and speculation about changes to salary sacrifice and pensions, so this might not be the ideal time - but I'd still go ahead and raise the matter anyway, given how many rumours don't come to fruition.

micklesthwaite said:

I know that a pension fund is invested, but not really sure how I would go about choosing a pension provider which offers more than inflation, so the pot doesn't lose real-terms value. Where does one look to find a large reliable provider offering a decent peformance?

From the above, am I looking at this the right way or is my understanding fundamentally wrong in some way?

I'm 57 by the way.

Very much appreciate the advice and time taken to respond.

Some basic reading would help eg https://www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot

As mentioned above, it's highly unlikely your employer would agree to pay to your own choice of scheme to enable you to use salary sacrifice for that. 

MX5huggy

Just get your company to swap to Salary Sacrifice contributions using Nest scheme here’s the link on how to do it pass that on to the accountant then you don’t need to think about new schemes or investment choices as well as the salary sacrifice. https://www.nestpensions.org.uk/schemeweb/nest/employers/managing-scheme/salary-sacrifice.html

Marcon

molerat said:

I'd like to add 1000 a month and it seems like salary sacrifice is a good option for both them and me.

Salary sacrifice is not you adding to your pension, it is you agreeing to reduce your pay and the company adding to the pension.  You cannot sacrifice your pay below minimum wage, have you taken that into account, and for a small company the extra admin may be too much effort.

OP's salary is just under £50K so £12K salary sacrifice isn't an issue.

dunstonh

The company doesn't offer any salary sacrifice. It is a small company, only 5 employees.

Size is not an issue as to whether salary sacfrice is available or not.   Firms with just one employee can use it.

Nest offers salary sacrifice.    So, there is no excuse from the employer not to use it unless employees are below the threshold.

I know that a pension fund is invested, but not really sure how I would go about choosing a pension provider which offers more than inflation, so the pot doesn't lose real-terms value. Where does one look to find a large reliable provider offering a decent peformance?

The pension is just a container for investments.  the pension provider doesnt influence the returns.  They are just the administrator.  Most modern individual pensions are whole of market nowadays.  i.e. they all have the same investments.   Some may have a few unique options (i.e. own brand) that they do not make available to others but on the whole, 30,000 investment options is the typical with mainstream platform SIPPs.

However, an employer is unlikely to pay to your individual pension. It can be messy and many individual schemes are not auto-enrolment compliant.  So, you would be classed as an opt out and it would create extra work for the employer.

ali_bear

micklesthwaite said:

Thanks for the advice everyone.

....

I know that a pension fund is invested, but not really sure how I would go about choosing a pension provider which offers more than inflation, so the pot doesn't lose real-terms value. Where does one look to find a large reliable provider offering a decent peformance?

...

I'm 57 by the way.

There are quite a few providers available but each offers possibly thousands of funds to invest in. That is the important decision. Past performance does not guarantee future, etc. ..