davie h
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| posted on 26/1/10 at 11:26 PM |
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salary sacrifice scheme
My employer is going to introduce a salary sacrifice scheme whereby they will lower my salary by the amount i pay to my pension (about £3500 a year
not a month). they will then make the pension contribution for me and i will according to them reap the benefits to the tune of an extra £15 a
month(woo hoo) in my take home pay as i will pay less NI.
now call me suspicious but i dont trust the buggers and im worried about the potential outcome for my pension when i retire as i should be in the same
job for the next 21 years.
is anyone else involved in these schemes or are there any financial wiz kids/girls on here in the know.
cheers Davie
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twybrow
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| posted on 26/1/10 at 11:29 PM |
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My company (GE) do exactly the same. It is quite common. Nothing to worry about AFAIK.
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MikeR
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| posted on 26/1/10 at 11:33 PM |
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my company did something similar with my pay about 8 years ago - only did it for a year as the tax loophole was closed.
Just make sure the money does go into your pension and not into some fund, which gets paid into your pension at a later date (ie just in case your
company goes bankrupt your money doesn't disappear).
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Doofus
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| posted on 26/1/10 at 11:35 PM |
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It might effect the size or mortgage you can get because it reduces your income, that they use to calculate what they can loan. Only really a problem
if you intend to get the biggest mortgage you can.
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davie h
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| posted on 26/1/10 at 11:39 PM |
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my main worry is my pension and any possible problems ,as i see it they are changing me from a contributory pension to a non contributory as i would
no longer be paying to the pension and my worry is that if there was a problem with the pension scheme and it was in financial trouble could the
somehow claim i have not made any contrabutions, is it even possible that they could claim that. i dont even know if that make any sense or if im
worrying over nothing and should treat myself to a crate of beer every month with my windfall.
Davie
[Edited on 26/1/10 by davie h]
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ashg
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| posted on 26/1/10 at 11:46 PM |
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i would say the best thing you can do is get the paperwork and go to a financial adviser.
Anything With Tits or Wheels Will cost you MONEY!!
Haynes Roadster (Finished)
Exocet (Finished & Sold)
New Project (Started)
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davie h
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| posted on 26/1/10 at 11:48 PM |
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quote:
Originally posted by ashg
i would say the best thing you can do is get the paperwork and go to a financial adviser.
thats my next step i just thought i would ask on here as just about anything can be answered. cheers for the replies
Davie
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stevebubs
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| posted on 27/1/10 at 12:09 AM |
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Normal as far I as know (both Siemens & Cable & Wireless operate similar schemes)
S
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stevebubs
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| posted on 27/1/10 at 12:27 AM |
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PS I think the fundamental reason most companies do this is that is saves them on their employers' NI contributions.
When applying for a mortgage etc, your company will normally quote a "notional salary" to your mortgage company - this is your take-home
gross salary + pension, i.e. the same salary as you have today. This should be covered in their FAQs....
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craig1410
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| posted on 27/1/10 at 12:31 AM |
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My employer organises what is called a Group PERSONAL Pension scheme. The key thing here is the PERSONAL bit. This means it is mine and is financially
completely separate from the company. They contribute 5% of salary and I contribute 5% on a matched basis. It is much the same thing as giving me a 5%
pay rise and then doing a salary sacrifice of 10%.
You do pay less tax because you don't get taxed on pension contributions and if you are a higher rate tax payer you can claim back even more
money by doing a tax return. If you are a standard rate tax payer then you will save NI as you mentioned.
Just make sure that it is a Personal pension scheme which is wholly owned by you and that it is with a financially stable pension provider. A
financial adviser would be able to look at it in more detail and may well be worthwhile.
HTH,
Craig.
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norfolkluego
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| posted on 27/1/10 at 12:35 AM |
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Agree with Steve, it's about the NI saving for your employer, they can pay the same as you do currently into your pension but as it's not
salary they don't pay NI on it (neither do you I would think), they gain at no cost to you (you may even save something on NI), fairly common
these days but as said if you're worried see an FA.
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Simon
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| posted on 27/1/10 at 12:42 AM |
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Is this similar to AVC's (Additional Voluntary Contributions)?
If so, and in my opinion, I'd run a mile. I used to work with a chap who was really keen on these. We worked out you'd put an extra
£14,000 in to get £1k/year out. This was before Gordo started taxing pension funds.
Once the money was in, it stayed in, and he died about 3 months after retiring.
As others suggest, get it looked at professionally.
I don't have a pension, apart from the pitance that I gained from 20 years in London, I figure I'll turn to crime, get caught and then
looked after by the state. It'll be one way of getting it back
ATB
Simon
ATB
Simon
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whitestu
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| posted on 27/1/10 at 07:49 AM |
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Same thing is done where I work. I agree it sounds dodgy, but don't think it actually is.
Stu
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Daddylonglegs
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| posted on 27/1/10 at 08:42 AM |
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Our company is doing exactly the same thing. It's obviously for the benefit of the employee though surely?  
It looks like the Midget is winning at the moment......
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sucksqueezebangblow
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| posted on 27/1/10 at 10:01 AM |
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My Pension with my company is done this way. If the company is fair (as mine is) for every £100 you give up from your pay packet (net, after tax) you
should get the following added; Tax at 25% or 40% (depending on the tax rate you pay) Employees national insurance contributions of 8% (but might have
gone up, can't remember) and employers national insurance contributions of 12%. So in effect you should get £145 or £160 paid into your pension.
If your employer is looking to save money they might not give you the employers national insurance contributions of 12% but mine gives me it.
[Edited on 27/1/10 by sucksqueezebangblow]
Better to Burnout than to Fade Away JET METAL ~ AndySparrow © 
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NS Dev
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| posted on 27/1/10 at 10:54 AM |
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Pension.....what's one of those..........
I'm really not looking forward to being old, but hey ho!!
I'm 32 now, and after having 2 pension schemes robbed by thieving corporations, and now being self employed, a pension is something I can only
imagine having.
Retro RWD is the way forward...........automotive fabrication, car restoration, sheetmetal work, engine conversion
retro car restoration and tuning
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wilkingj
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| posted on 27/1/10 at 11:34 AM |
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Thats cos pension payments laws have changed in the last few years.
You can check with HMRC, and they should be able to confirm the exact situation for you.
I would also get regular pension statements, to make sure they ARE actually paying it into your pension pot.
Personally If I had my time again, I would buy a second house and rent it out. Then put all the money into that, so when you retire, you have a second
house with mortgage paid, and then draw the rent as pension. You will allways then still have the capital in reserve.
OK house prices can go down. However, over 20+ years they definately go up overall.
Lets put it this way, the house I bought in 1976 cost £11k (yes eleven-K) I sold it for £83k in 1990, and it it sold for £198K in 2004/5. Its about
£240k now (a mate still lives in the same street in a similar house).
Despite two recessions, IMHO property is still beating the average. I just wish I could have bought a second house to rent out.
Its all too late for me, I'm 57, and should have done this 40 years ago. Although Buy to Let was not an option then.
Best thing is to take GOOD professional advice, and get it in WRITING, so you might have some comeback if it all goes wrong.
Dont take advice from people who are not acredited Financial Advisors. ie me!
I can only tell you what I did or think I should have done!
Dont follow me, I'm lost too
1. The point of a journey is not to arrive.
2. Never take life seriously. Nobody gets out alive anyway.
Best Regards
Geoff
http://www.v8viento.co.uk
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Tiger Super Six
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| posted on 27/1/10 at 03:19 PM |
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I work for a Financial Advisors and no theres is no problem with a Salary Sacrifice Scheme and NO it is not like an AVC scheme.
Hopefully, to put it simply - you currently pay say £50 into your pension and when paying this you have to pay tax and NI on your gross salary before
the amount is then taken out of your NET pay.
With the scheme you employer reduces your salary by x amount which means that you net take home pay is exactly the same as it was before the scheme
(you will not be better off each month). By giving up the salary though your employer does not have as much employers NI to pay and for this they then
make an employers pension contribution equivalant to what they were paying before, plus what you paid (been taken from your salary (i.e. sacrificed)
plus the NI saving they have made.
You are no worse off each month and the employer is no better off each month, the only thing to improve is the amount of money going into your pension
scheme.
You also made reference to the fact that it is now a non contributory pension scheme. It is correct that the employer is the only one now making the
pension contribution, but this will be through a personal pension type arrangement offered under a 'company' scheme banner. Therefore all
the money invested is in your name only and the company cannot reclaim any of the fund for 'dodgy dealing'.
HTH
PS - They should provide you with a copy of the salary sacrifice calculation and also a letter from the pension provider confirming the increased
pension contribution.
[Edited on 27/1/10 by Tiger Super Six]
Mark
Tiger Avon
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Vindi_andy
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| posted on 27/1/10 at 03:20 PM |
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The company I work for offer a similar thing. It does work out you save money because your gross pay is lower therefore less tax and less NI.
In mine the pension company is a seperate company. It is still a contributory scheme its just the company is paying your contribution for you, mine
will match any contributions I make upto a threshhold
It may not affect your mortgage as this is based on Nett pay ie takehome and not gross pay and when you do the calculations because of the reduced tax
and NI you may find that your actually take home the same or, in some cases in the office i work in, more
As has been said its primarily to take advantage of the change in pension law. One of those changes is you can have as many pensions as you like as
long as your total contributions are less than a certain percentage of your salary
ETA I didnt read supersix's post before I typed this
[Edited on 27/1/10 by Vindi_andy]
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Tiger Super Six
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| posted on 27/1/10 at 03:34 PM |
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quote:
Originally posted by Vindi_andy
The company I work for offer a similar thing. It does work out you save money because your gross pay is lower therefore less tax and less NI.
[Edited on 27/1/10 by Vindi_andy]
I can assure you that you won't be better off. The lower tax and NI are on a lower initial gross salary because you have sacrificed some.
The whole scheme is not about getting more income, it is simply to take advantage of the fact that Employers don't have to pay NI on pension
contributions but they do on salary costs.
Mark
Tiger Avon
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davie h
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| posted on 27/1/10 at 06:18 PM |
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Mark
im just in from work so im a bit rushed, my company have given me in writing that i will be £15 a month or so better off. they will reduce my pay by
£270 a month and put the £270 into my pension..
(although i know i wont miss it as thats what i pay each month to my pension and wont notice that im getting payed any less) but they have said that
because im getting paid less i will pay less ni and be £15 better and they wil make money on not paying as much ni.
i do get annual pension reviews and im tempted to go along with it for a year(although from what i hear most of the staff have choose to opt out of
the scheme) and check my review when it comes through the door.
Davie
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Tiger Super Six
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| posted on 27/1/10 at 10:42 PM |
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Hi mate, that's not how a salary sacrifice scheme works as it is a tool to enhance pension contributions.
Do you have the calculation to email me and I will take a look and I can let you have a normal calculation showing how the usual give up would enhance
your pension.
Mark
Tiger Avon
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