Company pension options

Marcon

ali_bear said:

With my company you had to formally request a change in SS arrangements in writing, I think this is probably enough. HMRC could send out warnings but they would struggle to enforce any kind of retrospective measure. And I'm glad to say it's too late in my case 

If an employer has been operating a salary sacrifice scheme which doesn't comply with the rules, it isn't a case of enforcing a 'retrospective measure', but rather simply applying the legislation as it stands - which means sending  a bill for underpaid NI.

Whether it could be successfully argued that an employee has a unilateral right to vary their salary (which is what salary sacrifice is all about) would be interesting. Didn't work for my client.

MallyGirl

ali_bear said:

With my company you had to formally request a change in SS arrangements in writing, I think this is probably enough. HMRC could send out warnings but they would struggle to enforce any kind of retrospective measure. And I'm glad to say it's too late in my case 

Me too! Other SS options like car, bike, holiday buy/sell, gym membership, dental etc were set at the start of the year and could only be changed due to a life event. The pension seemed to be a pull not a push so I could just log in to L&G and change the numbers in the same way that I could change the investment choices 

El_Torro

Marcon said:

Whether it could be successfully argued that an employee has a unilateral right to vary their salary (which is what salary sacrifice is all about) would be interesting. Didn't work for my client.

The way I've always understood it, for salary sacrifice pension contributions an employer can either choose to allow employees to change their contribution levels whenever they want or they can impose a limit, for example only doing it at the start of the tax year. 

At my company we're allowed to do it whenever we want. Various other people in this thread seem to have the same arrangement. Not to say that it's a legal right of course, though many employers (even very large employers) seem to have no problem allowing it.

Albermarle

Marcon said:

Albermarle said:

BloomNew said:

Thank you everyone!  Very helpful and wasn't aware you wouldn't pay NI.

Salary sacrifice is basically a loophole and is costing the Treasury Billions of Pounds in lost NI ( as the employer also avoids paying some as well).
No doubt will come under scrutiny in the forthcoming budget ( again) but there are some technical issues that would make it complicated to abolish it.

Far from being a loophole, salary sacrifice is a well-established political policy decision with the relevant legislation backing it up. The objective was, and is, to drive 'desired' behaviours eg contributing to a pension scheme, or travelling by bike rather than car.

What is far more likely to come under scrutiny is whether employers are sticking to the rules relating to salary sacrifice. A worrying number of people are posting here saying that they can change the amount they salary sacrifice 'whenever they like' (or words to that effect), when the requirements are very clear indeed: salary sacrifice requires a contractual change to salary (or bonus arrangements), amongst other things. Anyone who fondly believes that HMRC won't spot that they aren't sticking to the rules needs to think again, as one of my clients recently found to their cost.

OK not a loophole.
However I am thinking that the Govt never intended it to be used to such an extent for pensions, that must be losing them Billions in lost revenue ?

QrizB

MallyGirl said:

ali_bear said:

With my company you had to formally request a change in SS arrangements in writing, I think this is probably enough. HMRC could send out warnings but they would struggle to enforce any kind of retrospective measure. And I'm glad to say it's too late in my case 

Me too! Other SS options like car, bike, holiday buy/sell, gym membership, dental etc were set at the start of the year and could only be changed due to a life event. The pension seemed to be a pull not a push so I could just log in to L&G and change the numbers in the same way that I could change the investment choices 

I forget exactly where I read it (it was on this forum somewhere, but that doesn't narrow it down much!) but it was a consequence of some other piece of employment law that meant HMRC had to allow ad-hoc changes to pension salsac.

Minimum wage law, perhaps, or auto-enrollment? I'll have to search some more.

JoeCrystal

QrizB said:

MallyGirl said:

ali_bear said:

With my company you had to formally request a change in SS arrangements in writing, I think this is probably enough. HMRC could send out warnings but they would struggle to enforce any kind of retrospective measure. And I'm glad to say it's too late in my case 

Me too! Other SS options like car, bike, holiday buy/sell, gym membership, dental etc were set at the start of the year and could only be changed due to a life event. The pension seemed to be a pull not a push so I could just log in to L&G and change the numbers in the same way that I could change the investment choices 

I forget exactly where I read it (it was on this forum somewhere, but that doesn't narrow it down much!) but it was a consequence of some other piece of employment law that meant HMRC had to allow ad-hoc changes to pension salsac.

Minimum wage law, perhaps, or auto-enrollment? I'll have to search some more.

I vaguely recalled it was related to auto-enrollment and the fact that they have to re-enrol their employees at random points in time into the pension schemes every so often and they can opt out if they want to.

poseidon1

BloomNew said:

Thank you everyone!  Very helpful and wasn't aware you wouldn't pay NI.

In my case the additional attraction of SS for me was my employer was more than happy to contribute their employer's NI savings in addition to their contractual contributions. However I did make the request, since i also got them to bypass the staff scheme and divert all contributions to my own Sipp.

Maybe a case of if you don't ask, you don't get.

Cobbler_tone

Worth pointing out as the term ‘salary sacrifice’ can be misleading and some people don’t fully understand it. Your salary (pre-SS) is still very important. e.g. during redundancy, apply for a loan/mortgage and pretty much anywhere that asks for your salary. Options around SS are flexible, so your salary is your salary. Due to SS and some of the comments I could see someone thinking otherwise.

BloomNew

After reading some of the recent posts.  I'm not so sure about swapping to the Salary Sacrifice scheme. I don't want to end up with an HMRC bill but need to consider the best option for pension saving. 

QrizB

BloomNew said:

After reading some of the recent posts.  I'm not so sure about swapping to the Salary Sacrifice scheme. I don't want to end up with an HMRC bill but need to consider the best option for pension saving. 

?

The NI saving is free money, tax you would otherwise have paid.

Which posts in particular make you worried about an HMRC bill?