Should I meet take full company matching allowance?

JMC39

Hi,

Currently I don't have a pension, however I have just started a new job which means I now have enough money to start saving. Now, I've got a feeling the answer to my question will be a big YES from people, but here goes....

I am 26, earning £32500. My employer currently offers upto 10% of salary matching via Salary Sacrifice - if I take the whole 10%, this costs me around £270 a month.

I know its a can of worms, but based on general opinion the sensible thing seems to be to take the full 10% which would give me around £540 a month in my pension. Am I correct in thinking this, or is it worth considering lowering the percentage so that I can place more money in Shares/ISA?

Thanks for the help!

jem16

JMC39 wrote: »

Hi, Now, I've got a feeling the answer to my question will be a big YES from people, but here goes....

YES

I know its a can of worms, but based on general opinion the sensible thing seems to be to take the full 10% which would give me around £540 a month in my pension. Am I correct in thinking this, or is it worth considering lowering the percentage so that I can place more money in Shares/ISA?

Thanks for the help!

It's free money. Would you turn down a 10% increase in salary?

JMC39

That's what I thought, just wanted to make sure. Unfortunatly, the pension opening period closes soon, so I haven't had a huge amount of time to read up - I won't be this ignorant next year!

dunstonh

"FREE MONEY"

if I take the whole 10%, this costs me around £270 a month.

Actually its less than that as the £270 is the gross figure. The net figure is £216 assuming basic rate tax at 20% (seeing as we are that close to the change in April).

is it worth considering lowering the percentage so that I can place more money in Shares/ISA?

The ISA will never come close to matching the benefits.

bigbloke45

Do It Now!

Retired_I.F.A.

No!


Not immediately anyways and presuming its not a pension plan of your own choice but of the employers with charges to which you have to accept.

Your employer is happy to alter a couple of figures on the payroll software (salary sacrifice) so ask him if he's agreeable to signing a direct debit from the companies bank account paying the contribution into a plan of your choice. You then free to choose the provider of your pension and negotiate better terms via an IFA working for you not your employer.

JMC39

Thanks for your post Retired I.F.A, however I have now submitted my application to the company.

I will however take into account your comments for next year - would be interested to know whether they would allow me to put the money into another pension. They are a big company though, so not sure if they would make an exception or not.

Retired_I.F.A. wrote: »

No!


Not immediately anyways and presuming its not a pension plan of your own choice but of the employers with charges to which you have to accept.

Your employer is happy to alter a couple of figures on the payroll software (salary sacrifice) so ask him if he's agreeable to signing a direct debit from the companies bank account paying the contribution into a plan of your choice. You then free to choose the provider of your pension and negotiate better terms via an IFA working for you not your employer.

Retired_I.F.A.

Yeah the bigger the company the bigger the position in it you need to get to decide how your wages are spent.

The European courts ruled pensions are a part of pay so the reality is the "free money" is really effectively free money spendable in our shop only.
Takes you back a century or two ago where the mill owner paid you in his own coinage spendable only in the shop he owned. lol and they say we have progressed since then.

Are you getting the employers savings on their NI contribution going into the pension or are they allowing you to do salary sacrifice as it's profitable for them?

JMC39

I think the NI contributions are going into the pension as they have raised their contribution levels after moving to salary sacrifice.

Retired_I.F.A.

Well yes that'd happen if they put your salary sacrifice and NI savings into it anyway but often they dont put their NI savings in.