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    • Jaguar Skills
    • By Jaguar Skills 7th Aug 18, 11:14 AM
    • 427Posts
    • 62Thanks
    Jaguar Skills
    Private Pension or Workplace via Salary Sacrifice?
    • #1
    • 7th Aug 18, 11:14 AM
    Private Pension or Workplace via Salary Sacrifice? 7th Aug 18 at 11:14 AM
    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.
Page 1
    • kidmugsy
    • By kidmugsy 7th Aug 18, 11:30 AM
    • 11,368 Posts
    • 7,889 Thanks
    kidmugsy
    • #2
    • 7th Aug 18, 11:30 AM
    • #2
    • 7th Aug 18, 11:30 AM
    (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
    • By lisyloo 7th Aug 18, 11:48 AM
    • 22,277 Posts
    • 10,907 Thanks
    lisyloo
    • #3
    • 7th Aug 18, 11:48 AM
    • #3
    • 7th Aug 18, 11:48 AM
    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
    • By atush 7th Aug 18, 11:50 AM
    • 16,997 Posts
    • 10,620 Thanks
    atush
    • #4
    • 7th Aug 18, 11:50 AM
    • #4
    • 7th Aug 18, 11:50 AM
    Yes, need more info but on the whole SS is where i'd go.
    • Jaguar Skills
    • By Jaguar Skills 7th Aug 18, 11:53 AM
    • 427 Posts
    • 62 Thanks
    Jaguar Skills
    • #5
    • 7th Aug 18, 11:53 AM
    • #5
    • 7th Aug 18, 11:53 AM
    (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.
    Originally posted by kidmugsy
    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)
    • Jaguar Skills
    • By Jaguar Skills 7th Aug 18, 11:55 AM
    • 427 Posts
    • 62 Thanks
    Jaguar Skills
    • #6
    • 7th Aug 18, 11:55 AM
    • #6
    • 7th Aug 18, 11:55 AM
    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?
    Originally posted by lisyloo
    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
    • By kidmugsy 7th Aug 18, 12:24 PM
    • 11,368 Posts
    • 7,889 Thanks
    kidmugsy
    • #7
    • 7th Aug 18, 12:24 PM
    • #7
    • 7th Aug 18, 12:24 PM
    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)
    Originally posted by Jaguar Skills
    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.
    • Jaguar Skills
    • By Jaguar Skills 7th Aug 18, 12:38 PM
    • 427 Posts
    • 62 Thanks
    Jaguar Skills
    • #8
    • 7th Aug 18, 12:38 PM
    • #8
    • 7th Aug 18, 12:38 PM
    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.
    Originally posted by kidmugsy
    PM?

    I need help....
    • Jaguar Skills
    • By Jaguar Skills 7th Aug 18, 12:59 PM
    • 427 Posts
    • 62 Thanks
    Jaguar Skills
    • #9
    • 7th Aug 18, 12:59 PM
    • #9
    • 7th Aug 18, 12:59 PM
    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.
    Originally posted by kidmugsy
    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
    • By lisyloo 7th Aug 18, 1:00 PM
    • 22,277 Posts
    • 10,907 Thanks
    lisyloo
    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
    • By atush 7th Aug 18, 1:28 PM
    • 16,997 Posts
    • 10,620 Thanks
    atush
    Why in God's name would your employer use SJP?
    • Jaguar Skills
    • By Jaguar Skills 7th Aug 18, 1:46 PM
    • 427 Posts
    • 62 Thanks
    Jaguar Skills
    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.
    Originally posted by lisyloo
    Without trying to sound arrogant, there isn't anyway I could get down into the basic bracket.
    • Jaguar Skills
    • By Jaguar Skills 7th Aug 18, 1:47 PM
    • 427 Posts
    • 62 Thanks
    Jaguar Skills
    Why in God's name would your employer use SJP?
    Originally posted by atush
    I know it is irritating a little but I don't think me trying to get them to change will happen. His personal pension is with them and got suckered into the marketing.

    We are a relatively little company and he just likes the ease of it.

    Which makes me come back to my original question, would it be beneficial to keep paying the same into my PP and just leave my work as it is?
    • lisyloo
    • By lisyloo 7th Aug 18, 2:00 PM
    • 22,277 Posts
    • 10,907 Thanks
    lisyloo
    Without trying to sound arrogant, there isn't anyway I could get down into the basic bracket.
    Originally posted by Jaguar Skills

    Not arrogant at all.
    I was just pointing out that the additional NI benefits are a lot lower (as you're not paying much in the first place at that level, so can't save it).
    As always the devil is in the detail.
    The tax relief is good but you'd get that whichever way you do it.
    • Jaguar Skills
    • By Jaguar Skills 7th Aug 18, 2:11 PM
    • 427 Posts
    • 62 Thanks
    Jaguar Skills
    Not arrogant at all.
    I was just pointing out that the additional NI benefits are a lot lower (as you're not paying much in the first place at that level, so can't save it).
    As always the devil is in the detail.
    The tax relief is good but you'd get that whichever way you do it.
    Originally posted by lisyloo
    I must admit, I don't really hugely understand it all other than putting away as much as possible into my PP.

    I deposited around 38k last year into my PP but just never know whether I should put more into my workplace one as that is just whatever the standard rate is + NI contribution.

    Am trying my best though, just get lost with all the tax rules and advantages.
    • lisyloo
    • By lisyloo 7th Aug 18, 2:18 PM
    • 22,277 Posts
    • 10,907 Thanks
    lisyloo
    Do you do a tax return to reclaim the higher rate tax on your personal pension?
    • Jaguar Skills
    • By Jaguar Skills 7th Aug 18, 2:24 PM
    • 427 Posts
    • 62 Thanks
    Jaguar Skills
    Do you do a tax return to reclaim the higher rate tax on your personal pension?
    Originally posted by lisyloo
    Yeah I had an accountant do that for me, he has done it for the last couple years. Had a rebate of just over 7k
    • Triumph13
    • By Triumph13 7th Aug 18, 2:36 PM
    • 1,269 Posts
    • 1,602 Thanks
    Triumph13
    Without trying to sound arrogant, there isn't anyway I could get down into the basic bracket.
    Originally posted by Jaguar Skills
    Wrong!
    Although tax is calculated annually, NI is calculated monthly. By using the lump sum facility to sacrifice down to minimum wage in those months, you can get 12% employee's NI relief on a decent chunk of the contribution. If the employer is also passing on their 13.8% then this route is WAY better than your PP.
    • lisyloo
    • By lisyloo 7th Aug 18, 2:46 PM
    • 22,277 Posts
    • 10,907 Thanks
    lisyloo
    By using the lump sum facility to sacrifice down to minimum wage in those months

    I didn't know that, but it does assume the employer is willing to be flexible.
    My employer does not allow that kind of flexibility to put it up/down every month.
    • Jaguar Skills
    • By Jaguar Skills 7th Aug 18, 2:48 PM
    • 427 Posts
    • 62 Thanks
    Jaguar Skills
    Wrong!
    Although tax is calculated annually, NI is calculated monthly. By using the lump sum facility to sacrifice down to minimum wage in those months, you can get 12% employee's NI relief on a decent chunk of the contribution. If the employer is also passing on their 13.8% then this route is WAY better than your PP.
    Originally posted by Triumph13
    Are you able to explain this a little more please? Does it not depend on what I earn?
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