Private Pension or Workplace via Salary Sacrifice?

Hi all,

Just a brief question. I currently pay in a lump sum into a private pension each month and then deposit larger sums during my bonus periods.

In November 2017 my company confirmed that salary sacrifice would be available with the NI savings passed on to the employee. I opted into this as soon as I could but didn't increase any contributions.

The notes from the salary sacrifice email are here:

Please note that if you would like to pay over any above the standard 2% into your pension you can. There are 2 ways this can be done. You can increase your 2% contribution to a specified amount, and or/you can make lump sum contributions. This can be done with or without opting into salary sacrifice, although salary sacrifice is the more tax efficient way of paying into the pension. Please note that to simplify the administration process of salary sacrifice, it will only be possible to pay in lump sums twice per year (through March and September pay runs).

My question relates to whether it would be more beneficial to increase my workplace contributions or my keep my personal ones as they are with the lump sums in March/September going into workplace or personal.

Does it also make a difference what the fees are? My PP is a low cost platform but my workplace one is St James Place which I know is fairly high cost.

If there is any other details that are needed, to give me an informed decision, please shout. Thanks in advance. :j
«134567

Comments

  • kidmugsy
    kidmugsy Posts: 12,709
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    (i) Do you pay basic rate income tax or higher rate?
    (ii) Does your employer add any of the saved Employer's NIC to your pension pot?
    (iii) Tell us the charges (to you) of the two different pensions.
    Free the dunston one next time too.
  • lisyloo
    lisyloo Posts: 29,583
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    Does depend on the answers to i and ii, but I salary sacrifice the max I can and then periodically transfer from my high cost HL workplace scheme to my peronal SIPP.


    Note there are downsides of using your bonus.
    Firstly you might be buying at an expensive time and monthly payments tend to average that out. Also if it's not going via salary sacrifice you might be losing out on reliefs. Could you increase monthly and keep the bonuses?
  • atush
    atush Posts: 18,719
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    Yes, need more info but on the whole SS is where i'd go.
  • kidmugsy wrote: »
    (i) Do you pay basic rate income tax or higher rate?
    (ii) Does your employer add any of the saved Employer's NIC to your pension pot?
    (iii) Tell us the charges (to you) of the two different pensions.

    Thanks kidmugsy

    1) I can confirm that I am a higher rate tax payer - I can disclose salary if required

    2) The NIC is added, isn't that the section where it says NI saving passed on to employee or have I misunderstood?

    3) My PP is through Cavendish Online and I invest in Blackrock Consensus 100 and Vanguard Lifestrategy 80. I think therefore the fees (copied from the website) are:

    On typical funds the charges will be broken down as:
    Fund Charge 0.75%, FundsNetwork fee 0.20%, Cavendish Online fee 0.05% = Total Charge of 1.00% per year

    For my work place, again copied from the St James Place presentation we received it is:

    Low charges 0.67% AMC (0.5% for transfers)
  • lisyloo wrote: »
    Does depend on the answers to i and ii, but I salary sacrifice the max I can and then periodically transfer from my high cost HL workplace scheme to my peronal SIPP.


    Note there are downsides of using your bonus.
    Firstly you might be buying at an expensive time and monthly payments tend to average that out. Also if it's not going via salary sacrifice you might be losing out on reliefs. Could you increase monthly and keep the bonuses?

    Thanks for the advice, I have just had a significant basic increase (whcih reduces my bonus figures) so yes easier to do this. At the moment £600 PCM is paid into private but have a fair bit to play with and could certainly up it if we think this is the way forward.

    I just wasn't sure whether to increase workplace or company. I could for instance keep my personal @ £600 then maybe add another @ £400 into work place?
  • kidmugsy
    kidmugsy Posts: 12,709
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    1) I can confirm that I am a higher rate tax payer - I can disclose salary if required

    2) The NIC is added, isn't that the section where it says NI saving passed on to employee or have I misunderstood?

    3) My PP is through Cavendish Online and I invest in Blackrock Consensus 100 and Vanguard Lifestrategy 80. I think therefore the fees (copied from the website) are:

    On typical funds the charges will be broken down as:
    Fund Charge 0.75%, FundsNetwork fee 0.20%, Cavendish Online fee 0.05% = Total Charge of 1.00% per year

    For my work place, again copied from the St James Place presentation we received it is:

    Low charges 0.67% AMC (0.5% for transfers)

    Thank you. I would very much like to help you but I'm on a warning from the site censors so I'd better say nowt.
    Free the dunston one next time too.
  • kidmugsy wrote: »
    Thank you. I would very much like to help you but I'm on a warning from the site censors so I'd better say nowt.

    PM? :rotfl:

    I need help....
  • kidmugsy wrote: »
    Thank you. I would very much like to help you but I'm on a warning from the site censors so I'd better say nowt.

    If I cannot ask on here for advice then do I need to see an IFA?

    It seems a bit overkill for limited advice but will if I have to.
  • lisyloo
    lisyloo Posts: 29,583
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    2) The NIC is added, isn't that the section where it says NI saving passed on to employee or have I misunderstood?
    There are 2 types on NIC.
    Employees NI (which you will definitely save just by not paying it in the first place) is 12% at basic level and 2% at higher level.


    Employers NI - which they can choose to pass on in full or in part or not at all, is 13.8% basic and 0% higher.


    You might in fact make greater savings if you get down into the basic rate tax band.


    As an example I save 20% income tax + 12.2% NI plus 13.8% employer NI = total = 45.8% !!!


    But my employer is generous in passing on all of their savings.
  • atush
    atush Posts: 18,719
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    Why in God's name would your employer use SJP?
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