Salary sacrifice question.

B

ben g

Elite
 Essex
My workplace participates in a salary sacrifice scheme, where our work pension comes out before it can be taxed (I think that's how it works), so our net pay is slightly higher than someone who doesn't participate in that scheme.

I am one of those employees who opted out of salary sacrifice years ago, as I wasn't sure on what exactly it entailed and whether it would affect my pension in any way.

My work colleague is in the scheme, and takes home £5 a week more than me. Hardly much, but it pays for a meal at work once a week, so it's better than nothing!

Is this something worth opting back into before the new tax year begins? Or am I better off staying out of it?

I've asked my union rep about it, aswell as reading the paperwork available, but it gives no definitive answer as to whether it will affect anything regarding my pension.

Thanks in advance :thumbsup:
 
I'm in salary sacrifice scheme. It's no brainer really. The amount you pay into your pension is taken out of your salary before tax, so in turn you pay less tax on your salary as you are effectively being paid less :thumbsup: and afaik is has no affect on your pension pot at the end other than you can afford to pay more in :D
 
Its a good scheme, Im now paying 15% into my pension , as its taken before tax its not a lot out of my take home at the end of the month.
 
no fit state said:
I'm in salary sacrifice scheme. It's no brainer really. The amount you pay into your pension is taken out of your salary before tax, so in turn you pay less tax on your salary as you are effectively being paid less :thumbsup: and afaik is has no affect on your pension pot at the end other than you can afford to pay more in :D
Click to expand...

I think the only reason I opted out at the start was due to it affecting your gross pay, which is what mortgage applications are based on. So effectively you're not able to borrow as much as you could without participating in salary sacrifice.

I have my mortgage now, so I'm not reliant on worrying about getting a big mortgage, so might aswell opt back in if there aren't any other disadvantages?
 
Frankie169 said:
Its a good scheme, Im now paying 15% into my pension , as its taken before tax its not a lot out of my take home at the end of the month.
Click to expand...

Does your employer contribute the same 15%? Or do they give a put in a fixed amount?

I can't remember exactly what my employer (Ford Motor Company) contribute, but I do know my batch of starters (June 2007) were the last ones to sign up to the private pension, before they closed it to new applicants, due to being in a massive deficit :o
 
"Does your employer contribute the same 15%? Or do they give a put in a fixed amount?" I WISH!!! I know they make a nice contribution which is over and above the normal 5% but will need to check how much.
 
I think the only negative would be when applying for a mortgage. Thats not an issue now so id opt in if i was you (i opted in when my firm offered)
 
When you sacrifice your salary into pension it does indeed reduce your reference salary for things like mortgages and possibly benefits like death in service cover.

On the plus side it's never assessed for either income tax or national insurance. That saves you 12% on top of the income tax relief you get. It also means the employer doesn't pay employer's national insurance on the part you sacrifice. Some companies will pass on part or all of that NI saving they make on to you, usually as part of the employer pension contributions they make.

It's usually a no brainer to use salary sacrifice. If the same amount goes in it doesn't affect your benefits at the other end.
 
There needs to be even more to be honest.

In the past you were often in a defined benefit scheme and just accepted that a little bit of your pay was going into it. Now if you do the same you won't be saving anything like enough for a reasonable retirement. The ethos has changed too so everyone is too busy servicing debts rather than saving something real.

PS: I'm only 34 but pensions are a large part of my day job.
 
Many good comments here from reduced income & NI tax savings which I benefitted from.

I also regret contracting out for a few years & now have contracted back in to Gov pension, as something’s better than nothing & fingers x will still be there when I retire.

Additional contributions are also another way of reducing the CSA calculation for those affected as I previously was, though don’t try to get clever moving it up & down as they tend to test every so often
 
Contracting out can actually give you more overall if you've still got enough time to get a 35 year NI record. Once you hit that you've got the maximum state pension but still get to keep your contracted out money. Contracting out does mean you usually need more than 35 years though to make up the period you were out.
 
I was in a salary sacrifice pension payment scheme, it made sense to me, i don’t pay into it anymore though :P
Rob
 
Smartbear said:
I was in a salary sacrifice pension payment scheme, it made sense to me, i don’t pay into it anymore though :P
Rob
Click to expand...

I've got a fair way to go yet :lol: 30 years old and this year is 12 years of company service :cry: earliest I can retire with my private pension is 56 :lol:
 
Steve84N said:
When you sacrifice your salary into pension it does indeed reduce your reference salary for things like mortgages and possibly benefits like death in service cover.

On the plus side it's never assessed for either income tax or national insurance. That saves you 12% on top of the income tax relief you get. It also means the employer doesn't pay employer's national insurance on the part you sacrifice. Some companies will pass on part or all of that NI saving they make on to you, usually as part of the employer pension contributions they make.

It's usually a no brainer to use salary sacrifice. If the same amount goes in it doesn't affect your benefits at the other end.
Click to expand...

Cheers for that :thumbsup: I had a read of some paperwork earlier and it said the earliest I can opt back in is on any date in April, so will have to wait a little longer.
 
You must log in or register to reply here.
Back
Top Bottom