Salary Sacrifice vs Personal Pension

Ped1987

I am planning to retire in 6-7 years and I’m currently enrolled in a salary sacrifice DC scheme (employer paying 10% and myself 8%).

With the restrictions due to be implemented in April 2029, is it worth making hay whilst the sunshines now and increase my contribution. Or would I be better off starting a personal pension and claiming tax relief on my contributions and then reduce my salary sacrifice contributions to £2K from 2029 shifting the payments to the personal pension?

NormalNorman

For example wife salary sacrifices with her employer to the max allowed then continues further contributions into her SIPP pension in the run up to retirement over the next few years. Subject to all the usual allowances. Cheers

El_Torro

As the salary sacrifice rules currently stand you're better off making the most of it for now, to save on National Insurance payments. This will leave you better off than contributing to a personal pension. 

Remember that your employer can't pay you less than minimum wage, so there are limits to how much you can contribute via salary sacrifice. 

Marcon

Ped1987 said:

I am planning to retire in 6-7 years and I’m currently enrolled in a salary sacrifice DC scheme (employer paying 10% and myself 8%).

With the restrictions due to be implemented in April 2029, is it worth making hay whilst the sunshines now and increase my contribution. Or would I be better off starting a personal pension and claiming tax relief on my contributions and then reduce my salary sacrifice contributions to £2K from 2029 shifting the payments to the personal pension?

Entirely up to you whether you increase your salary sacrifice contributions for the next 3 years. If you can afford to do so and want to boost your pension provision, it makes sense, assuming you have scope to do so (ie as the post above points out, there's a limit because of the minimum wage issue).

The (income) tax relief would be the same either way - salary sacrifice only gives you a saving on NI. Whether you'd be better off starting a personal pension and contributing to that, rather than making personal (ie non-salary sacrifice contributions) to your workplace pension, depends how well any personal pension you set up compares in terms of charges, fund choices etc.

Albermarle

Just to be clear after 2029, there will be no changes as to how much tax relief you can get on pension contributions.
The rules for that are not changing.

Salary sacrifice gives you an extra NI saving and this is what will be restricted. 

Exodi

Ped1987 said:

I am planning to retire in 6-7 years and I’m currently enrolled in a salary sacrifice DC scheme (employer paying 10% and myself 8%).

With the restrictions due to be implemented in April 2029, is it worth making hay whilst the sunshines now and increase my contribution. Or would I be better off starting a personal pension and claiming tax relief on my contributions and then reduce my salary sacrifice contributions to £2K from 2029 shifting the payments to the personal pension?

It's probably obvious that you should make the most out of the SalSac while you still can.

As to after April 2029 (or if or when it actually happens), I still think it's a no brainer contributing through SalSac.

Firstly, you wouldn't get the employer contribution on personal contributions (which is pretty much case closed on this).

Secondly, while there will be a £2k cap on contributions liable to receive NI relief, that's still (assuming you're a higher rate tax payer) 2000*0.02 = £40 of saved NI.

Thirdly, your employer (who may share the benefit with you), would be saving 2000*0.15 = £300.

In both options, you will receive income tax relief (though for personal contributions you need to claim it or do self assessment - currently it's effectively automatic).

I just don't see a single benefit to switching to personal contributions in 2029, but plenty of downsides.

tigerspill

El_Torro said:

As the salary sacrifice rules currently stand you're better off making the most of it for now, to save on National Insurance payments. This will leave you better off than contributing to a personal pension. 

Remember that your employer can't pay you less than minimum wage, so there are limits to how much you can contribute via salary sacrifice. 

I ran into this when I started my final few working years contributing to my work pension.  I initially tried to put 100% into my pension.  My company restricted this.  My solution was to open a SIPP and put this remainder into that to get maximum tax relief (obviously no NI relief on this part).

So I would be making the most of salary sacrifice while I could.  Free money.

Sam_666

tigerspill said:

El_Torro said:

As the salary sacrifice rules currently stand you're better off making the most of it for now, to save on National Insurance payments. This will leave you better off than contributing to a personal pension. 

Remember that your employer can't pay you less than minimum wage, so there are limits to how much you can contribute via salary sacrifice. 

I ran into this when I started my final few working years contributing to my work pension.  I initially tried to put 100% into my pension.  My company restricted this.  My solution was to open a SIPP and put this remainder into that to get maximum tax relief (obviously no NI relief on this part).

So I would be making the most of salary sacrifice while I could.  Free money.

You company did right thing and protected itself from you, as comany would be hit by financial penalties from hmrc.
Little knowledge is damgerous knowledge.
If you did a rearch, you would have known that every company MUST pay min national wage.

Marcon

Sam_666 said:

tigerspill said:

El_Torro said:

As the salary sacrifice rules currently stand you're better off making the most of it for now, to save on National Insurance payments. This will leave you better off than contributing to a personal pension. 

Remember that your employer can't pay you less than minimum wage, so there are limits to how much you can contribute via salary sacrifice. 

I ran into this when I started my final few working years contributing to my work pension.  I initially tried to put 100% into my pension.  My company restricted this.  My solution was to open a SIPP and put this remainder into that to get maximum tax relief (obviously no NI relief on this part).

So I would be making the most of salary sacrifice while I could.  Free money.

You company did right thing and protected itself from you, as comany would be hit by financial penalties from hmrc.
Little knowledge is damgerous knowledge.

You are so right - a little knowledge is indeed a dangerous thing, especially when displayed on a public forum.

Sam_666 said:

If you did a rearch, you would have known that every company MUST pay min national wage.

Maybe you should have done your research before criticising? 

Some people are not entitled to the minimum wage. This includes someone who is:

• self-employed
• a volunteer (by choice)
• a company director
• in the armed forces
• doing work experience as part of a course
• work shadowing
• a family member living at home and working for the family business
• under school leaving age

Source: https://www.acas.org.uk/national-minimum-wage-entitlement/who-gets-the-minimum-wage

tigerspill

Sam_666 said:

tigerspill said:

El_Torro said:

As the salary sacrifice rules currently stand you're better off making the most of it for now, to save on National Insurance payments. This will leave you better off than contributing to a personal pension. 

Remember that your employer can't pay you less than minimum wage, so there are limits to how much you can contribute via salary sacrifice. 

I ran into this when I started my final few working years contributing to my work pension.  I initially tried to put 100% into my pension.  My company restricted this.  My solution was to open a SIPP and put this remainder into that to get maximum tax relief (obviously no NI relief on this part).

So I would be making the most of salary sacrifice while I could.  Free money.

You company did right thing and protected itself from you, as comany would be hit by financial penalties from hmrc.
Little knowledge is damgerous knowledge.
If you did a rearch, you would have known that every company MUST pay min national wage.

They did.  I wasnt complaining - I just didnt know the rules until that time.  Thanks for the insult anyway.

MEM62

As nothing is changing until 2029, salary sacrifice is still as good as it ever was.  There is nothing to prompt you to make any changes before 2026.  Take advantage of it for as long as you can.