Advice needed re. salary sacrifice - effects on bonuses, 40% tax band

jonathon_hart

Is it a Final salary or Money Purchase scheme. If it is Final Salary then it is very hard to quantify what if any savings they are making (the company pays in the amount necessary to ensure the scheme has enough money to meet its liabilities). If it is Money Purchase then it depends on whether they are contributing the Employer NI saving they are making by getting you to SS into your pension pot or whether they are pocketing it. The Employer NI saving is the only possible saving for the company to make here.

As for you income tax/ NI questions yes to all of them.

bigbloke45

!!!!!! here, it looks like you are saving .25% of your contribuon, but may I suggest that this is the wrong way to do your percentages?

If your ss has reduced your contribution from 5.00% to 4.75%, then the real percentage saving on your contribution is 5% (i.e .25/5 times 100). this would mean that your employer has kept the other 6% (assuming NI conts at 11%). So, you have actually got quite a good gain for doing an ss and your employer is also better off by about the same amount.

Dick_here

Sorry, but where does .25/5 * 100 come into it ?

jiggy2

in my case if no salary sacrifice used then
i contribute - £100
company contributes - £100

if salary sacrifice used:
i contribute £90
company contributes £110

so the company passes on nearly all of the NI saving they make onto me + my take home pay is slightly higher (due to only £90 going out instead of £100).

Jig

bigbloke45

DH, I was trying to show that .25% of salary equates to 5% of contribution saved. .25% represents one twentieth of your contribution, i.e. 5%. With NI rates at 11%, your employer saves 6% of your contribution or .3% of your salary.

I hope this clarifies what I meant to say.

Dick_here

bigbloke45 wrote: »

DH, I was trying to show that .25% of salary equates to 5% of contribution saved. .25% represents one twentieth of your contribution, i.e. 5%. With NI rates at 11%, your employer saves 6% of your contribution or .3% of your salary.

I hope this clarifies what I meant to say.

Yes it does, thanks. It also shows that the company is doing better out of this than I am !

EdInvestor

As is often the way with pensions....

Dick_here

EdInvestor wrote: »

As is often the way with pensions....

Should I stop paying it and go for an ISA instead ?

jamesd

Only if you want less income than the pension would provide. With the pension you get that employee NI rebate from salary sacrifice and the tax gain from the 25% tax free cash of the pension. The ISA route doesn't provide either of those.

The ISA is good for building up a larger lump sum or investing until you are a higher rate tax payer and can get higher rate tax relief on your contributions.

bigbloke45

DH, stop stressing about this!

I have been a pensions adviser for many years to many firms. Believe me, most cannot be bothered to help their staff with a ss plan (other than for directors!) simply because they reckon the admin costs outweigh the perceived benefit from their staff who they think don't give a rat's !!!!!

So, if your employer is willing to go through the pain of setting up a ss scheme and they also get some saving as well (remember it was good old Gordon who added in the extra 1%), then what is wrong with that?

On a 10% NI basis, you both share the gain from ss. I would call this a "win win" situation.