Potential capping of Salary Sacrifice (speculation)?

Cobbler_tone

MallyGirl said:

Grumpy_chap said:

Cobbler_tone said:

We have an aging workforce and SS forms a key part of our benefits package. Eg I sacrifice £3k out of £5.1k a month and won’t be unique,

I think that is an overlooked feature of the SS options that are currently available.

It is, generally, better that people reaching retirement can do so with a comfortable retirement (and spending to keep churning the economy) than on the tight constraints of SP alone.  Plus, an individual who can self-finance a comfortable retirement will be less likely to receive state funding for care homes should the need arise.

There are many that either simply could not afford, or simply did not thing about, pension contributions in their earlier years.  As those individuals reach the distinguished side of 50, they might be fortunate enough to be more better financially positioned and also seeking to catch up their retirement funding.  I am one of them and will make the maximum pension contributions I can.

The availability of a higher SS threshold allows me to do that and to "catch up" the tax relief that would have been received more slowly had I had the finance and understanding when I was 20 that I have now.  

I don't believe that I am unique either.

Definitely not unique - this was me too. I had been a mortgage free wannabe for many years (with memories of my first mortgage at 17%) so had only ever contributed enough to maximise the employer contribution. OH had always put more in and been very high in equities so we were pretty unbalanced in terms of pension values. I had my lightbulb moment and switched focus to the pension in my last few years, putting in the max allowed, via SS.

I think that lightbulb moment generally only comes with age, awareness and most importantly, net affordability.
You won’t get many 40 years old lumping huge amounts into pensions, unless they are high earners and savvy.
I have a friend who will pull in £150k this year, she only puts 3% in but has had 5 big holidays abroad and doesn’t even overpay her mortgage at the age of 52. I’ve had the discussions but she is the prime example of ‘living in the moment’. She’s always been like that, has barely 6 figures in her pension after joining one late but people have to navigate life how they see fit. 

artyboy

Cobbler_tone said:

MallyGirl said:

Grumpy_chap said:

Cobbler_tone said:

We have an aging workforce and SS forms a key part of our benefits package. Eg I sacrifice £3k out of £5.1k a month and won’t be unique,

I think that is an overlooked feature of the SS options that are currently available.

It is, generally, better that people reaching retirement can do so with a comfortable retirement (and spending to keep churning the economy) than on the tight constraints of SP alone.  Plus, an individual who can self-finance a comfortable retirement will be less likely to receive state funding for care homes should the need arise.

There are many that either simply could not afford, or simply did not thing about, pension contributions in their earlier years.  As those individuals reach the distinguished side of 50, they might be fortunate enough to be more better financially positioned and also seeking to catch up their retirement funding.  I am one of them and will make the maximum pension contributions I can.

The availability of a higher SS threshold allows me to do that and to "catch up" the tax relief that would have been received more slowly had I had the finance and understanding when I was 20 that I have now.  

I don't believe that I am unique either.

Definitely not unique - this was me too. I had been a mortgage free wannabe for many years (with memories of my first mortgage at 17%) so had only ever contributed enough to maximise the employer contribution. OH had always put more in and been very high in equities so we were pretty unbalanced in terms of pension values. I had my lightbulb moment and switched focus to the pension in my last few years, putting in the max allowed, via SS.

I think that lightbulb moment generally only comes with age, awareness and most importantly, net affordability.
You won’t get many 40 years old lumping huge amounts into pensions, unless they are high earners and savvy.
I have a friend who will pull in £150k this year, she only puts 3% in but has had 5 big holidays abroad and doesn’t even overpay her mortgage at the age of 52. I’ve had the discussions but she is the prime example of ‘living in the moment’. She’s always been like that, has barely 6 figures in her pension after joining one late but people have to navigate life how they see fit. 

Funnily enough, it was around the ago of 40 that I was seriously shoveling money into my pension, so I'll take the compliment, thank you 

Aretnap

Cobbler_tone said:

MallyGirl said:

Grumpy_chap said:

Cobbler_tone said:

We have an aging workforce and SS forms a key part of our benefits package. Eg I sacrifice £3k out of £5.1k a month and won’t be unique,

I think that is an overlooked feature of the SS options that are currently available.

It is, generally, better that people reaching retirement can do so with a comfortable retirement (and spending to keep churning the economy) than on the tight constraints of SP alone.  Plus, an individual who can self-finance a comfortable retirement will be less likely to receive state funding for care homes should the need arise.

There are many that either simply could not afford, or simply did not thing about, pension contributions in their earlier years.  As those individuals reach the distinguished side of 50, they might be fortunate enough to be more better financially positioned and also seeking to catch up their retirement funding.  I am one of them and will make the maximum pension contributions I can.

The availability of a higher SS threshold allows me to do that and to "catch up" the tax relief that would have been received more slowly had I had the finance and understanding when I was 20 that I have now.  

I don't believe that I am unique either.

Definitely not unique - this was me too. I had been a mortgage free wannabe for many years (with memories of my first mortgage at 17%) so had only ever contributed enough to maximise the employer contribution. OH had always put more in and been very high in equities so we were pretty unbalanced in terms of pension values. I had my lightbulb moment and switched focus to the pension in my last few years, putting in the max allowed, via SS.

I think that lightbulb moment generally only comes with age, awareness and most importantly, net affordability.
You won’t get many 40 years old lumping huge amounts into pensions, unless they are high earners and savvy.

Hmmm... for me it was at about 40, a decade or so ago that I switched from paying in 10% to 25% - in response to frantic pre- budget speculation that higher rate tax relief was about to be abolished. I thought I'd better grab as much as I could while it was there.

Not sure whether that makes me savvy or a mug, but inertia stopped me switching back, and it seems to have worked out for me in the end. It does show that there's nothing new under the sun when it comes to pre-budget rumours, or people responding hastily to them.

GunJack

At 40 I'd just left 20 yrs in the civil service and gone into the private sector to another DB pension scheme, which ran until April 2024. Replaced at that point with a pretty generous DC scheme which I'm now stacking to bridge between retirement and private and SP becoming payable. Both private sector elements are/were sal sac but if that is removed or limited then I may have to rethink my strategy....

Veloflyer

MallyGirl said:

Grumpy_chap said:

Cobbler_tone said:

We have an aging workforce and SS forms a key part of our benefits package. Eg I sacrifice £3k out of £5.1k a month and won’t be unique,

I think that is an overlooked feature of the SS options that are currently available.

It is, generally, better that people reaching retirement can do so with a comfortable retirement (and spending to keep churning the economy) than on the tight constraints of SP alone.  Plus, an individual who can self-finance a comfortable retirement will be less likely to receive state funding for care homes should the need arise.

There are many that either simply could not afford, or simply did not thing about, pension contributions in their earlier years.  As those individuals reach the distinguished side of 50, they might be fortunate enough to be more better financially positioned and also seeking to catch up their retirement funding.  I am one of them and will make the maximum pension contributions I can.

The availability of a higher SS threshold allows me to do that and to "catch up" the tax relief that would have been received more slowly had I had the finance and understanding when I was 20 that I have now.  

I don't believe that I am unique either.

Definitely not unique - this was me too. I had been a mortgage free wannabe for many years (with memories of my first mortgage at 17%) so had only ever contributed enough to maximise the employer contribution. OH had always put more in and been very high in equities so we were pretty unbalanced in terms of pension values. I had my lightbulb moment and switched focus to the pension in my last few years, putting in the max allowed, via SS.

I'd agree, but at heart it is surely just another stealth tax? As such, it will overrule any arguments such as those posed above.

Cobbler_tone

artyboy said:

Cobbler_tone said:

MallyGirl said:

Grumpy_chap said:

Cobbler_tone said:

We have an aging workforce and SS forms a key part of our benefits package. Eg I sacrifice £3k out of £5.1k a month and won’t be unique,

I think that is an overlooked feature of the SS options that are currently available.

It is, generally, better that people reaching retirement can do so with a comfortable retirement (and spending to keep churning the economy) than on the tight constraints of SP alone.  Plus, an individual who can self-finance a comfortable retirement will be less likely to receive state funding for care homes should the need arise.

There are many that either simply could not afford, or simply did not thing about, pension contributions in their earlier years.  As those individuals reach the distinguished side of 50, they might be fortunate enough to be more better financially positioned and also seeking to catch up their retirement funding.  I am one of them and will make the maximum pension contributions I can.

The availability of a higher SS threshold allows me to do that and to "catch up" the tax relief that would have been received more slowly had I had the finance and understanding when I was 20 that I have now.  

I don't believe that I am unique either.

Definitely not unique - this was me too. I had been a mortgage free wannabe for many years (with memories of my first mortgage at 17%) so had only ever contributed enough to maximise the employer contribution. OH had always put more in and been very high in equities so we were pretty unbalanced in terms of pension values. I had my lightbulb moment and switched focus to the pension in my last few years, putting in the max allowed, via SS.

I think that lightbulb moment generally only comes with age, awareness and most importantly, net affordability.
You won’t get many 40 years old lumping huge amounts into pensions, unless they are high earners and savvy.
I have a friend who will pull in £150k this year, she only puts 3% in but has had 5 big holidays abroad and doesn’t even overpay her mortgage at the age of 52. I’ve had the discussions but she is the prime example of ‘living in the moment’. She’s always been like that, has barely 6 figures in her pension after joining one late but people have to navigate life how they see fit. 

Funnily enough, it was around the ago of 40 that I was seriously shoveling money into my pension, so I'll take the compliment, thank you 

Having kids in my mid-30's I was never going to be in that position. They're on their own now!! 
Even so, I doubt my mindset would have been pension focused at 40, although I had 20 years service in a good DB so maybe not on my radar. 

Lowtrawler

A great many of us close to retirement will have enjoyed DB pensions in the early part of our careers. With a small number of notable exceptions, those are now only available for those in the public sector. It is unlikely future generations will face such well funded retirements.

Salary sacrifice is an encouragement to make sufficient provision for retirement and any tinkering can only discourage pension saving. Far from discouraging pension saving, the government needs to be doing more to increase pension saving. Perhaps they will increase minimum contribution levels and make it more difficult to opt out.

At the end of the day, salary sacrifice is an uneven playing field with some employers offering it and others not. However, withdrawing salary sacrifice as an option should be balanced with measures to increase pension saving. It should not be done in isolation.

Veloflyer

Lowtrawler said:

A great many of us close to retirement will have enjoyed DB pensions in the early part of our careers. With a small number of notable exceptions, those are now only available for those in the public sector. It is unlikely future generations will face such well funded retirements.

Salary sacrifice is an encouragement to make sufficient provision for retirement and any tinkering can only discourage pension saving. Far from discouraging pension saving, the government needs to be doing more to increase pension saving. Perhaps they will increase minimum contribution levels and make it more difficult to opt out.

At the end of the day, salary sacrifice is an uneven playing field with some employers offering it and others not. However, withdrawing salary sacrifice as an option should be balanced with measures to increase pension saving. It should not be done in isolation.

I fully agree, but I think one has to realize that pensions will increasingly become a juicy target for tax revenue. Capping SS, lump sum withdrawals, lump sum itself etc perhaps. Granted the status quo looks to be maintained....for now, but for the future? I fear not. It is just too tempting a target given the ever increasing spend and the need to borrow less.    

af1963

I've yet to see any argument put forward here (or elsewhere) that gives a good reason why someone using salary sacrifice for their pension should get a better deal than someone using relief at source.

I used salary sacrifice a lot when working for employers who provided it - but it's not universally available, and plenty of people manage to save towards their pension without using it. And low paid staff don't have the option at all.

hugheskevi

It is interesting to looks at HMRC statistics on pension tax reliefs:

• In 23/24 the cost of salary sacrifice contributions was £1.2bn of employee NICs, and £2.9bn employer NICs
• That is up from £0.9 and £1.9bn in 2019/20
• The hike in employer contributions and inflation from 23/24 will have increased the numbers further.
• The total cost of reliefs, both income tax and National Insurance, relating to pensions have increased from £62.6bn in 19/20 to £78.2bn in 23/24
• Within the numbers, deficit reduction contributions fell from £4.4bn in 19/20 to 2.1bn in 23/24.
• Annual and Lifetime Allowance charges income fell from £0.7bn in 19/20 to £0.2bn  in 23/24

Those are big numbers to start with, and some are growing rapidly.