How do you actually do salary sacrifice?
Discussion
I start a new job in a couple of months which is a little over 6 figures. I've read up lots on the tax issues in this band, and that many recommend sacrificing this and bonus payments into a pension.
My plan is to sacrifice 25% or similar to max out my pension allowances over the year.
However, I've never had this option before as I worked in a role where the pension was defined benefit and there were no real suitable options to boost it.
So how does it usually work?
- Is there a pension management thing I can log in to change this month-to-month?
- Like can I login now for example, and choose to sacrifice 13.9% of this months pay or some other figure I choose?
- Or, is it more strict in that you have to choose an amount and it stays that way for the year?
Thanks
My plan is to sacrifice 25% or similar to max out my pension allowances over the year.
However, I've never had this option before as I worked in a role where the pension was defined benefit and there were no real suitable options to boost it.
So how does it usually work?
- Is there a pension management thing I can log in to change this month-to-month?
- Like can I login now for example, and choose to sacrifice 13.9% of this months pay or some other figure I choose?
- Or, is it more strict in that you have to choose an amount and it stays that way for the year?
Thanks
The first point is to check with your employer that they offer SS.
Can’t take this for granted as some do and some don’t.
At this point you can ask how much of the NI saving they pass on.. (50% is common)
If they do offer SS, you still need to find out how they apply the scheme in practice as there is some variation here and there are some that will allow you to make an election but then expect you to stick with it unless you face a ‘life changing’ event (marriage, birth of a child etc.)
Other employers will be more flexible and more or less allow you to vary the amount you sacrifice on an ad hoc basis (a simple e-mail to payroll etc.)
Can’t take this for granted as some do and some don’t.
At this point you can ask how much of the NI saving they pass on.. (50% is common)
If they do offer SS, you still need to find out how they apply the scheme in practice as there is some variation here and there are some that will allow you to make an election but then expect you to stick with it unless you face a ‘life changing’ event (marriage, birth of a child etc.)
Other employers will be more flexible and more or less allow you to vary the amount you sacrifice on an ad hoc basis (a simple e-mail to payroll etc.)
Mogul said:
The first point is to check with your employer that they offer SS.
Can’t take this for granted as some do and some don’t.
At this point you can ask how much of the NI saving they pass on.. (50% is common)
If they do offer SS, you still need to find out how they apply the scheme in practice as there is some variation here and there are some that will allow you to make an election but then expect you to stick with it unless you face a ‘life changing’ event (marriage, birth of a child etc.)
Other employers will be more flexible and more or less allow you to vary the amount you sacrifice on an ad hoc basis (a simple e-mail to payroll etc.)
Thanks, that is really helpful.Can’t take this for granted as some do and some don’t.
At this point you can ask how much of the NI saving they pass on.. (50% is common)
If they do offer SS, you still need to find out how they apply the scheme in practice as there is some variation here and there are some that will allow you to make an election but then expect you to stick with it unless you face a ‘life changing’ event (marriage, birth of a child etc.)
Other employers will be more flexible and more or less allow you to vary the amount you sacrifice on an ad hoc basis (a simple e-mail to payroll etc.)
The job role is a remote role, with about 1500 people spread across different parts of the world. Their main head quarters is in the US.
I'll have to wait to hear back or wait until I start I think. None of the documentation has full specifics of the pension - only that it is 3% employee and 6% employer, but not the provider.
Our company use a very antiquated form that you have to download and print, and then complete in BLACK PEN. Then you are advised to fax (!) or scan and email to payroll.
Zero acknowledgment of receipt / action, but it did actually get set up and I can now log into our provider's website and can vary %age / funds etc directly from there.
Zero acknowledgment of receipt / action, but it did actually get set up and I can now log into our provider's website and can vary %age / funds etc directly from there.
Jakey123 said:
Even without salary sacrifice - you can increase pension contributions either via company scheme or a SIPP.
Then claim back the tax relief
Can I just clarify this as I am still getting to grips here:Then claim back the tax relief
I knew that salary sacrifice was the preferred method. All pay pre-tax and far more beneficial.
So are you saying that even if a company didn't allow this, you could pay into the SIPP after tax... but then claim back the tax to basically put you back at what you would have been with the SS option?
Felicity28 said:
Jakey123 said:
Even without salary sacrifice - you can increase pension contributions either via company scheme or a SIPP.
Then claim back the tax relief
Can I just clarify this as I am still getting to grips here:Then claim back the tax relief
I knew that salary sacrifice was the preferred method. All pay pre-tax and far more beneficial.
So are you saying that even if a company didn't allow this, you could pay into the SIPP after tax... but then claim back the tax to basically put you back at what you would have been with the SS option?
Agreed - Salary Sacrifice means that both you and your employer obtain relief from having to pay National Insurance Contributions.
If relief is given without Salary Sacrifice, you will only get TAX relief. And, to make matters worse, you only AUTOMATICALLY get tax relief at 20%. If you are a higher rate tax payer and pay tax at 40% or higher, you must then make a separate application to obtain the higher rate tax relief you are entitled to.
If relief is given without Salary Sacrifice, you will only get TAX relief. And, to make matters worse, you only AUTOMATICALLY get tax relief at 20%. If you are a higher rate tax payer and pay tax at 40% or higher, you must then make a separate application to obtain the higher rate tax relief you are entitled to.
Eric Mc said:
Agreed - Salary Sacrifice means that both you and your employer obtain relief from having to pay National Insurance Contributions.
If relief is given without Salary Sacrifice, you will only get TAX relief. And, to make matters worse, you only AUTOMATICALLY get tax relief at 20%. If you are a higher rate tax payer and pay tax at 40% or higher, you must then make a separate application to obtain the higher rate tax relief you are entitled to.
I've been in both situations and a salary sacrifice scheme is much better. I'm currently in the other scenario and I have to pay my pension contributions after already paying tax. I have to complete a HMRC self assessment each year to claim my extra 20% tax relief. If relief is given without Salary Sacrifice, you will only get TAX relief. And, to make matters worse, you only AUTOMATICALLY get tax relief at 20%. If you are a higher rate tax payer and pay tax at 40% or higher, you must then make a separate application to obtain the higher rate tax relief you are entitled to.
If you are not on a salary sacrifice scheme but you pay more into your pension, make sure you register for tax self assessment or that 20% tax relief goes unclaimed.
Gassing Station | Finance | Top of Page | What's New | My Stuff