Employer now gives back the Employers NI saving for sal sacrifice ..... question on strategy

MrGorsky

Looking for some guidance on whether I should adjust my pension contribution strategy in light of a recent change at work.

Background:

• Employer has just started contributing the full NI saving from salary sacrifice into our pensions (approx. 15% of sacrificed salary).
• I’m 45, with £450k in pensions, £25k of which is protected for age 55 access.
• Salary: £97k + 10% bonus.
• I currently contribute enough to bring my taxable income down to £60k, which works well for me financially.
• I also have £120k in Stocks & Shares ISAs.

Current Strategy:

• For the remainder of 2025, I’m contributing 73% of salary into pension (down to minimum wage), after contributing just 2% from April–July. This is to maximise the NI saving (~£1k for the year).
• From 2026 onwards, I’m considering whether to:
  1. Increase pension contributions to the full £60k annual allowance, using my ISA to cover any shortfall in take-home pay.
  2. Or stick with my current strategy, contributing ~£48k/year into pension and keeping ISA untouched.

Questions:

• Is it worth pushing pension contributions up to the full £60k to maximise the NI saving from salary sacrifice, especially now that the employer adds their NI saving?
• Would using my ISA to bridge the income gap be a sensible move, or am I better off preserving the ISA and keeping pension contributions at current levels?

Isthisforreal99

What level of pension income are you targetting?

The danger is you are potentially liable (depending on drawdown strategy) of paying higher rate tax when you do retire which negates somewhat the tax savings you have had when contributing.

Throw into the mix IHT incorporating pension pots then it needs a more balanced strategy aligned with your overall aims. It's not an all or nothing situation with pension vs ISA.

If you are married what is your spouse's pension provision like?

MrGorsky

Thanks for taking an interest.
Pension income should be around £40k for the household. My wife is 44, salary £35k, and has 18 years in civil service pension, which she pays more into to receive the pension a few years early. She will retire at same time as me. She has ~£70k in ISA and £35k in LISA.   I'm so lost with all of this tbh, feel we're in a good place, but strategy is difficult to comprehend. I've made it too complicated with best intentions . All ISAs / pensions are in very low fee platforms. My SIPP and ISA are on zero fee platforms with 0.1%  to 0.15% S&S ETF fees.

Mark_d

Personally I'd set the level of pension contribution such that your taxable income falls below the £50k higher rate threshold.

I'm not sure what you mean by saying "shortfall in take home pay"

DRS1

If you go for the £60k figure you are going to need to do some maths because the annual allowance includes employer contributions (which you may not be counting) but then you may have some spare AA from earlier years to carry forward.

Albermarle

MrGorsky said:

Thanks for taking an interest.
Pension income should be around £40k for the household. My wife is 44, salary £35k, and has 18 years in civil service pension, which she pays more into to receive the pension a few years early. She will retire at same time as me. She has ~£70k in ISA and £35k in LISA.   I'm so lost with all of this tbh, feel we're in a good place, but strategy is difficult to comprehend. I've made it too complicated with best intentions . All ISAs / pensions are in very low fee platforms. My SIPP and ISA are on zero fee platforms with 0.1%  to 0.15% S&S ETF fees.

I do not think you have made it too complicated, but you have a pretty aggressive accumulation strategy, without maybe fully thinking through why you are accumulating funds at such a high rate, and any potential negatives.
This forum is littered with threads from posters  who have spent their working lives accumulating money, and now do not know what to do with it all and/or are worried about losing a lot of in tax.

As an example there was one recently of a couple in their mid 50's who had amassed £3million, and whose planned retirement expenditure was between £30 and £50K a year. They were wondering whether they should stop working or not ..........

poseidon1

MrGorsky said:

Thanks for taking an interest.
Pension income should be around £40k for the household. My wife is 44, salary £35k, and has 18 years in civil service pension, which she pays more into to receive the pension a few years early. She will retire at same time as me. She has ~£70k in ISA and £35k in LISA.   I'm so lost with all of this tbh, feel we're in a good place, but strategy is difficult to comprehend. I've made it too complicated with best intentions . All ISAs / pensions are in very low fee platforms. My SIPP and ISA are on zero fee platforms with 0.1%  to 0.15% S&S ETF fees.

I imagine the prepondance of opinion here will be you to tailor your pension modelling to remain within the 20% tax band in retirement for as long as possible.

I will be the dissenting voice that states there is  nothing wrong being a 40% tax payer in retirement where you still get to keep 60% post tax. Certainly, it was my objective in retirement to rebuild income back beyond the 20% cut off ASAP.

However, given that both you and your wife have £40k annual ISA contributions available there is a lot to be said for also making that an integral part of your retirement income planning.

You will come to realise that ISA income is very valuable to the higher rate tax payer and gives you the option to 'flex' what you take from your DC pension to mitigate taxes each year. So in your position  and notwithstanding your employer's  generosity in crediting you with their NI savings , I would not go too overboard with DC pension funding if it means neglecting the considerable long term benefit of  large ISA pots.

MrGorsky

Mark_d said:

Personally I'd set the level of pension contribution such that your taxable income falls below the £50k higher rate threshold.

I'm not sure what you mean by saying "shortfall in take home pay"

Thanks for the reply. But short fall in take home pay, I meant if I increase my pension, I’d have reduced money in my hand which would need compensating from savings

MrGorsky

DRS1 said:

If you go for the £60k figure you are going to need to do some maths because the annual allowance includes employer contributions (which you may not be counting) but then you may have some spare AA from earlier years to carry forward.

Thanks, I never realised this. With the 6% employees contribution and the additional from the ni save, I will need to do the maths. I don’t have any spare prior years allowance.

MrGorsky

Albermarle said:

MrGorsky said:

Thanks for taking an interest.
Pension income should be around £40k for the household. My wife is 44, salary £35k, and has 18 years in civil service pension, which she pays more into to receive the pension a few years early. She will retire at same time as me. She has ~£70k in ISA and £35k in LISA.   I'm so lost with all of this tbh, feel we're in a good place, but strategy is difficult to comprehend. I've made it too complicated with best intentions . All ISAs / pensions are in very low fee platforms. My SIPP and ISA are on zero fee platforms with 0.1%  to 0.15% S&S ETF fees.

I do not think you have made it too complicated, but you have a pretty aggressive accumulation strategy, without maybe fully thinking through why you are accumulating funds at such a high rate, and any potential negatives.
This forum is littered with threads from posters  who have spent their working lives accumulating money, and now do not know what to do with it all and/or are worried about losing a lot of in tax.

As an example there was one recently of a couple in their mid 50's who had amassed £3million, and whose planned retirement expenditure was between £30 and £50K a year. They were wondering whether they should stop working or not ..........

Thanks for this, having been a debt free wannabe for a few years, I then kept saving what I’d been paying off the debt. I never stopped to think what for, other than so I can have options around work, and maybe retire early. I’ve worked at a few places that shut down, so I’d like a safety net.

Triumph13

The other key question is when do you want to retire?  There's every chance that pension access age will be 58 by the time you get there, apart from your small amount with a protected age.  You may well want to build up your ISAs, rather than run them down, to allow you to retire several years earlier than that.