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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 3
    • Jaguar Skills
    • By Jaguar Skills 8th Aug 18, 1:38 PM
    • 427 Posts
    • 62 Thanks
    Jaguar Skills
    Your GF is in a very precarious position.

    If she reads this, she should go back to work and get her own pension and income, if you have no plans to marry the mother of your child.
    Originally posted by atush
    We will get married but just wanted to wait until after the birth of our second. It will probably be in the next 3 years or so.

    We do have a flat which we jointly own that has 150k equity in it so plus our current house with around the same in it she has a bit of a fall back

    But I understand the concern for her. She isn't going to go back to work as my wage will cover us both and so it is nice for her to be at home with our son.

    I guess the way it could work is I pay into a pension for her but then no salary sacrifice benefits unless her ltd company could in some ways do this.
    • michaels
    • By michaels 8th Aug 18, 3:32 PM
    • 21,098 Posts
    • 97,585 Thanks
    michaels
    The more you can equalise pensions the more tax efficient it will be in retirement. One route is a divorce in name only on retirement to split the pension pot but assuming you don't want to go down that route, at the very least you should be making annual pension contributions for your partner of 2880 which will be grossed up to 3600.
    Cool heads and compromise
    • kidmugsy
    • By kidmugsy 8th Aug 18, 6:41 PM
    • 11,345 Posts
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    kidmugsy
    We will get married ... It will probably be in the next 3 years or so.
    Originally posted by Jaguar Skills
    Just how far away is the Registry Office?
    Free the dunston one next time too.
    • Jaguar Skills
    • By Jaguar Skills 9th Aug 18, 6:59 AM
    • 427 Posts
    • 62 Thanks
    Jaguar Skills
    Just how far away is the Registry Office?
    Originally posted by kidmugsy
    That's a afair point. We did talk about the protection/tax benefits of just doing it quickly but she doesn't just want to get married for money.

    So we are just going to take the hit on it a bit and wait for a few years till we have the two kids and can plan the wedding in the Carribean.
    • Jaguar Skills
    • By Jaguar Skills 9th Aug 18, 7:01 AM
    • 427 Posts
    • 62 Thanks
    Jaguar Skills
    The more you can equalise pensions the more tax efficient it will be in retirement. One route is a divorce in name only on retirement to split the pension pot but assuming you don't want to go down that route, at the very least you should be making annual pension contributions for your partner of 2880 which will be grossed up to 3600.
    Originally posted by michaels
    Is it still tax beneficial even though shes not paying any tax and I am HRT?
    • Dazed and confused
    • By Dazed and confused 9th Aug 18, 7:24 AM
    • 2,785 Posts
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    Dazed and confused
    She will get 20% relief at source (2880 paid becomes 3600 in the pension fund) and may pay no tax on the whole pension when taken whilst you could be paying 40/41% on yours.
    • Jaguar Skills
    • By Jaguar Skills 9th Aug 18, 8:15 AM
    • 427 Posts
    • 62 Thanks
    Jaguar Skills
    She will get 20% relief at source (2880 paid becomes 3600 in the pension fund) and may pay no tax on the whole pension when taken whilst you could be paying 40/41% on yours.
    Originally posted by Dazed and confused
    Thanks very much. What is the reason behind the 2,880 figure or is that a minimum?
    • MallyGirl
    • By MallyGirl 9th Aug 18, 10:12 AM
    • 2,873 Posts
    • 7,877 Thanks
    MallyGirl
    if someone is not earning they can still pay 3600 into a pension. That includes the 20% tax benefit so the actual contribution you would make would be the 2880. So she gets 20% tax benefit from the tax man even though she hasn't paid any tax.
    You did mention that she has a limited company though - is that paying her anything?
    • Jaguar Skills
    • By Jaguar Skills 9th Aug 18, 10:14 AM
    • 427 Posts
    • 62 Thanks
    Jaguar Skills
    if someone is not earning they can still pay 3600 into a pension. That includes the 20% tax benefit so the actual contribution you would make would be the 2880. So she gets 20% tax benefit from the tax man even though she hasn't paid any tax.
    You did mention that she has a limited company though - is that paying her anything?
    Originally posted by MallyGirl
    It isn't because she isn't working anymore.

    It did before a bit, so we put a lump sum in through her pension but then she went on maternity and hasn't gone back/earned any money!
    • MallyGirl
    • By MallyGirl 9th Aug 18, 10:54 AM
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    MallyGirl
    In that case definitely do the 3600 gross contributions - it gets 20% bonus going in and will probably all come out tax free.
    Yes, you would get 42% bonus going in to your pension but you could end up paying 40% tax on the way out too. Better to even the pensions out (even by a small amount) to reduce your pension tax bill.
    • atush
    • By atush 9th Aug 18, 11:18 AM
    • 16,995 Posts
    • 10,611 Thanks
    atush
    We will get married but just wanted to wait until after the birth of our second. It will probably be in the next 3 years or so.

    We do have a flat which we jointly own that has 150k equity in it so plus our current house with around the same in it she has a bit of a fall back

    But I understand the concern for her. She isn't going to go back to work as my wage will cover us both and so it is nice for her to be at home with our son.

    I guess the way it could work is I pay into a pension for her but then no salary sacrifice benefits unless her ltd company could in some ways do this.
    Originally posted by Jaguar Skills
    Do make sure you list each other in yur expression of wishes. as pensons ar outside your estate so she wont inherit it automatically.
    • atush
    • By atush 9th Aug 18, 11:22 AM
    • 16,995 Posts
    • 10,611 Thanks
    atush
    Also, if you are not married and she isnt working- she cant give you part of her unused personal allowance.

    Id do the registry and just not tell anyone (other than the tax man lol). have the 'wedding/renewl' in the caribbean later- you can pay for it with the tax you save
    • woolly_wombat
    • By woolly_wombat 9th Aug 18, 11:55 AM
    • 546 Posts
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    woolly_wombat
    Don't forget to ensure that she's registered for Child Benefit (even if she doesn't claim it) to ensure she gets NI credits to build State Pension entitlement.
    • Jaguar Skills
    • By Jaguar Skills 9th Aug 18, 1:26 PM
    • 427 Posts
    • 62 Thanks
    Jaguar Skills
    Don't forget to ensure that she's registered for Child Benefit (even if she doesn't claim it) to ensure she gets NI credits to build State Pension entitlement.
    Originally posted by woolly_wombat
    We have done that thanks.
    • Jaguar Skills
    • By Jaguar Skills 10th Aug 18, 10:35 AM
    • 427 Posts
    • 62 Thanks
    Jaguar Skills
    Hi all,

    Thanks for all taking the time to help me plan for the future. I have reread all the comments again this morning and plan to do the following. If anyone has anything further to add which might help me I would be grateful to hear them. I am only 32 and trying to plan and be good financially but tax/pensions is all very confusing!

    So the plan:

    1) During bonus periods rather than make lump sum deposits into my private pension, make a contribution of 15,000 (total 30,000 over the year) to my work place pension to take advantage of salary sacrifice. With my 600 PCM into private pension this will keep me just under the 40k annual allowance = 37,200.

    Can always add in a little more before 31 March if I like?

    2) Equalise pensions a little by making monthly contributions of 250 PCM to my GFs pension. Would this be better to go directly into her private pension or through her LTD company which is still dormant (even though she is not working?)

    Does anyone have anything else to add or comments on my questions/points above?
    • lisyloo
    • By lisyloo 10th Aug 18, 10:54 AM
    • 22,245 Posts
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    lisyloo
    is a divorce in name only
    What is this?
    There are specific grounds for divorce.
    If you mean making it up to acheive a tax advantage then that's probably perjury and tax evasion.


    You cannot get a divorce on demand (see Tina Owens case who's forced to stay unhappily married).
    Last edited by lisyloo; 10-08-2018 at 10:58 AM.
    • michaels
    • By michaels 10th Aug 18, 11:36 AM
    • 21,098 Posts
    • 97,585 Thanks
    michaels
    Hi all,

    Thanks for all taking the time to help me plan for the future. I have reread all the comments again this morning and plan to do the following. If anyone has anything further to add which might help me I would be grateful to hear them. I am only 32 and trying to plan and be good financially but tax/pensions is all very confusing!

    So the plan:

    1) During bonus periods rather than make lump sum deposits into my private pension, make a contribution of 15,000 (total 30,000 over the year) to my work place pension to take advantage of salary sacrifice. With my 600 PCM into private pension this will keep me just under the 40k annual allowance = 37,200.

    Can always add in a little more before 31 March if I like?

    2) Equalise pensions a little by making monthly contributions of 250 PCM to my GFs pension. Would this be better to go directly into her private pension or through her LTD company which is still dormant (even though she is not working?)

    Does anyone have anything else to add or comments on my questions/points above?
    Originally posted by Jaguar Skills
    For (1) This needs to work with NMW/NLW - not sure if this is assessed for each pay period (so monthly)?

    Don't know re 2, sorry. Would you be purchasing something from the company (your wife's labour?) in order to get the 2880 into it so it could afford to buy the pension?
    Cool heads and compromise
    • MallyGirl
    • By MallyGirl 10th Aug 18, 11:40 AM
    • 2,873 Posts
    • 7,877 Thanks
    MallyGirl

    So the plan:

    1) During bonus periods rather than make lump sum deposits into my private pension, make a contribution of 15,000 (total 30,000 over the year) to my work place pension to take advantage of salary sacrifice. With my 600 PCM into private pension this will keep me just under the 40k annual allowance = 37,200.
    Originally posted by Jaguar Skills
    The 40k has to include any employer contribution such as %age matchin or them giving back their NI.
    • Jaguar Skills
    • By Jaguar Skills 10th Aug 18, 12:00 PM
    • 427 Posts
    • 62 Thanks
    Jaguar Skills
    For (1) This needs to work with NMW/NLW - not sure if this is assessed for each pay period (so monthly)?

    Don't know re 2, sorry. Would you be purchasing something from the company (your wife's labour?) in order to get the 2880 into it so it could afford to buy the pension?
    Originally posted by michaels
    Hi, thanks - what do the abbreviations stand for in 1)

    re 2) I wouldn't be purchasing anything from her as I am PAYE so couldn't really justify this if HMRC asked. Was just thinking if her company paid it would it be any better but I think I can't do this?
    • lisyloo
    • By lisyloo 10th Aug 18, 12:14 PM
    • 22,245 Posts
    • 10,888 Thanks
    lisyloo
    1) refers to nation minmum wage.


    Your employer has to pay you minimum way by law, so if doing salary sacrifice you must receive this.
    As your a high earner might not be an issue in your case.


    If for example someone earned 40K per annum, they cannot salary sacrifce 40K as they have to received minimum wage, so their contribution limit would be more like 27.5K.
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