Should I take salary sacrifice or am I missing something?

MickT12 · 16 October 2016 at 12:36PM

Hi, this is my first post on the forum and I wondered if I could trouble you for your views please..

My company car is due to be replaced and my employer has given me the option of salary sacrifice to a pension instead of the car. I am thinking that this makes sense but wondered if my logic is correct. My Company will increase my salary by £5,000 (plus their NI) and I will sacrifice this; they say this will give me around £5,880 in to my pension. My company car has a taxable value of around £8,000 and I pay around £140 tax per month.

My logic: I give up the company car. This will save me £140 per month tax. I go with the pension which will receive just under £18,000 over the 3 years. I buy a second hand car for around £10,000 or look at a private lease plan. I would need to open a new pension plan (oh no that will be another big decision who to go with!) as I have a couple of old policies that I stopped paying and they will not accept any further contributions (value:30K: offered 50K to transfer out).

It looks like I should go with the pension but have I got this correct or am I missing something? If it is relevant, I am 51 years old, I have paid the mortgage off and I have some cash savings, but I urgently need to consider my options for future retirement. Thank you so much for your views.

Linton · 16 October 2016 at 1:06PM

Looks like a good deal to me with no pitfalls. Note that strictly speaking the company isnt increasing your salary, but rather increasing their employer's contribution to your pension. This isnt regarded as part of your salary.

kidmugsy · 16 October 2016 at 4:58PM

Your plan sounds sensible to me.

But what does this remark mean?

MickT12 wrote: »

I have a couple of old policies ... (value:30K: offered 50K to transfer out).

MickT12 · 16 October 2016 at 5:14PM

kidmugsy wrote: »

Your plan sounds sensible to me.

But what does this remark mean?

Thanks for the info. I have a couple of existing pension policies with Royal London that I stopped paying into around 10 years ago. Royal London say that I cannot make any further contributions to these and I would need to open a new policy if I want to start making payments again. The value of these is currently around £30k but they say the value would be around £50K if I wanted to transfer them to a new policy,

bigadaj · 16 October 2016 at 6:02PM

MickT12 wrote: »

Thanks for the info. I have a couple of existing pension policies with Royal London that I stopped paying into around 10 years ago. Royal London say that I cannot make any further contributions to these and I would need to open a new policy if I want to start making payments again. The value of these is currently around £30k but they say the value would be around £50K if I wanted to transfer them to a new policy,

Sounds like they may have guarantees so be very careful before transferring or doing anything else with them.

Apart from defined benefit and those with guarantees then newer pensions are generally better as they are more flexible and should have lower charges.

You can have as many pensions as you want and there is huge choice in providers.

Should I take salary sacrifice or am I missing something?

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