Inheritance and Pension

ali_bear

Kinclad said:

:
Does it make general economic sense to increase my pension % contributions to a point where I almost become reliable on my savings for month to month living expenses?
:

Yes, you will be deferring that money until retirement but that is not so far away now. As a minimum you should  probably sacrifice enough to take you out of 40% income tax. Going further you could take your taxable income down to the level of national minimum wage. Further still if you also pay into a personal pension. 

But there's the annual limit of gross contributions 60k. This can be brought forward from the previous three years if that was unused. 

I'm not sure if this would affect your ability to get consumer credit, something perhaps to consider. 

Marcon

ali_bear said:

Kinclad said:

:
Does it make general economic sense to increase my pension % contributions to a point where I almost become reliable on my savings for month to month living expenses?
:

Yes, you will be deferring that money until retirement but that is not so far away now. As a minimum you should  probably sacrifice enough to take you out of 40% income tax. Going further you could take your taxable income down to the level of national minimum wage. Further still if you also pay into a personal pension. 

But there's the annual limit of gross contributions 60k. This can be brought forward from the previous three years if that was unused. 

I'm not sure if this would affect your ability to get consumer credit, something perhaps to consider. 

Depends how much OP is earning in the tax year in which they wish to use carry forward.

Whether it impacts on the ability to get credit depends on the lender's approach. If they are satisfied OP has the means to repay, then all should be well - but you'd have to ask whether the cost of borrowing is a better option than paying lower pension contributions, especially if OP has sacrificed down to a point where they are only paying basic rate tax.

ali_bear

Maybe it would affect you when taking out a lease on a new car? 

doodling

Hi,

ali_bear said:

Maybe it would affect you when taking out a lease on a new car? 

Whether salary sacrifice affects your ability to get any form of credit is dependant on the way the sacrifice is evidenced to a lender and the lenders assessment of the extent to which you can vary that sacrifice in time of financial stress.

I've certainly never had an issue with mortgage lenders but (a) my "reference salary" (i.e. salary before sacrifice) and the extent of the sacrifice is clearly expressed on my payslips and (b) I only use salary sacrifice for pension contributions which I have been able to confirm to the lender can be varied quite quickly should it be necessary.

I've always stated my before sacrifice salary to lenders not requiring payslips as that is what I would earn if I did get to the point where missing payments was a risk.