New Job pension - not salary sacrifice

Hannah2

Hi
I have just started a new job and the work pension is apparently not done by salary sacrifice. The employer will contribute 5% salary but employee contribution is not by salary sacrifice.  However, apparently if I opt out of the nominated scheme and chose my own personal pension i can still request the 5% employer contribution and any payment I chose to make could be by salary sacrifice. 
Am I correct in thinking that this is a no brainer and that opting out of the nominated work scheme means that I gain the tax benefit which would be missing if I used their non-sacrifice scheme? 
I am trying to find out if I can continue to use my previous work pension which was with Royal London, but I am not sure if that closed when I left the last job.

Marcon

Hannah2 said:

Hi
I have just started a new job and the work pension is apparently not done by salary sacrifice. The employer will contribute 5% salary but employee contribution is not by salary sacrifice.  However, apparently if I opt out of the nominated scheme and chose my own personal pension i can still request the 5% employer contribution and any payment I chose to make could be by salary sacrifice. 
Am I correct in thinking that this is a no brainer and that opting out of the nominated work scheme means that I gain the tax benefit which would be missing if I used their non-sacrifice scheme? 
I am trying to find out if I can continue to use my previous work pension which was with Royal London, but I am not sure if that closed when I left the last job.

Salary sacrifice gives you an NI saving, but no 'extra' saving on income tax.

What you are describing sounds extraordinary - are you quite sure you've been given accurate information? It's hard to see why an employer would create work for themselves or why they would continue to nominate a scheme they don't want employees to join!

Devongardener

Hannah2 said:

Hi
I have just started a new job and the work pension is apparently not done by salary sacrifice. The employer will contribute 5% salary but employee contribution is not by salary sacrifice.  However, apparently if I opt out of the nominated scheme and chose my own personal pension i can still request the 5% employer contribution and any payment I chose to make could be by salary sacrifice. 
Am I correct in thinking that this is a no brainer and that opting out of the nominated work scheme means that I gain the tax benefit which would be missing if I used their non-sacrifice scheme? 
I am trying to find out if I can continue to use my previous work pension which was with Royal London, but I am not sure if that closed when I left the last job.

You need to check that your new employer is definitely offering to pay contributions into your personal non company scheme.  From my years in payroll I can’t imagine any employer doing this, faced with having to send those contributions to potentially multiple pension companies separately on time, quite apart from the additional accounting admin.

dunstonh

However, apparently if I opt out of the nominated scheme and chose my own personal pension i can still request the 5% employer contribution and any payment I chose to make could be by salary sacrifice. 

That seems unlikely unless you are a director or key worker.

Individual plans don't give the employer the ability to change payments.   An employer payer form would be needed each time the amount is changed with the vast majority of providers.

Are you sure the employer will do this?  

GunJack

More to the point, you'll get the tax advantage either way....with the new job and pension you'll probably find, if you look into it closer, that the pension provider will claim the tax relief on your behalf and add it to the pension direct.

Dazed_and_C0nfused

Hannah2 said:

Hi
I have just started a new job and the work pension is apparently not done by salary sacrifice. The employer will contribute 5% salary but employee contribution is not by salary sacrifice.  However, apparently if I opt out of the nominated scheme and chose my own personal pension i can still request the 5% employer contribution and any payment I chose to make could be by salary sacrifice. 
Am I correct in thinking that this is a no brainer and that opting out of the nominated work scheme means that I gain the tax benefit which would be missing if I used their non-sacrifice scheme? 
I am trying to find out if I can continue to use my previous work pension which was with Royal London, but I am not sure if that closed when I left the last job.

Salary sacrifice means you agree to a reduced salary in return for additional employer contributions.

So quite how you could make personal contributions using salary sacrifice is a mystery.  But presumably whoever suggested this was possible will be able to explain it to you.

Marcon

Not sure there's any point posting any further on this. OP needs to clarify with their employer - who might or might not have a clue what they're doing!

Hannah2

Hi All, sorry for the delay responding.  I did query this 3 times in the conversation that I had with the person in finance.  They said that they will probably change the company scheme to salary sacrifice, but it would not be for another 12 months.  I am going to email today and request clarification.  It did sound odd to me which is why I questioned it.  They did say that it would involve a lot of paperwork if I did want to use salary sacrifice to a personal pension, but that it was possible.  I will ask for clarification and come back to let you know.  However, I do understand now that it is the national insurance part that will be missed if it is not salary sacrifice, but that the tax benefit should be the same (I think I am understanding that correctly!).  I am also going to seek some independent financial advice before i make any decisions. Thanks again. 

dunstonh

They did say that it would involve a lot of paperwork if I did want to use salary sacrifice to a personal pension, but that it was possible.

It's certainly possible, but it's a manual process.  If your pensionable income doesn't change from month to month, then it will likely need work from you and the employer once a year.   If your pensionable pay changes each month then its a logistical nightmare with a limited window each month to get it correct with work required by you and the employer each month.

Albermarle

Hannah2 said:

Hi All, sorry for the delay responding.  I did query this 3 times in the conversation that I had with the person in finance.  They said that they will probably change the company scheme to salary sacrifice, but it would not be for another 12 months.  I am going to email today and request clarification.  It did sound odd to me which is why I questioned it.  They did say that it would involve a lot of paperwork if I did want to use salary sacrifice to a personal pension, but that it was possible.  I will ask for clarification and come back to let you know.  However, I do understand now that it is the national insurance part that will be missed if it is not salary sacrifice, but that the tax benefit should be the same (I think I am understanding that correctly!).  I am also going to seek some independent financial advice before i make any decisions. Thanks again. 

Independent financial advice is not cheap, and normally would not be appropriate/too expensive for this type of decision .

LHW99

If it's likely to be SalSac in a year or so, it may not be worth the hassle (for either you or the employer) to change to a personal scheme. Not all SalSac schemes do offer to share NI in any case though.