Pensions and salary sacrifice

[giggity]

Hi All,

So up until now I have never been part of a pension scheme as I felt I was "too young" to need to worry about needing to join, now I am half way to 50, (25) maybe I should look into it.

But I am totally lost about it all and do not know where to begin.

I am being offered a salary sacrifice that will allow for Lower contributions and stuff as explained here:

http://www.pensionsadvisoryservice.org.uk/workplac...

My worry is:

What if the government change the pensions and all the goalposts when I finally do get to retirement age and that age changes to say 75 or something.
What if I'm living abroad and retire abroad etc.
What if I decide I no longer want a pension scheme.

.... And various other silly worrys

Im totally lost and not sure if I should join up or not. I know the govt are keen for people to contribute to a pension scheme.

I know plently of info can be found on the web but I am just not sure at this point of my life if I need to bother or if it is worth it..

Need a dummy's guide and some PH help with this stuff please!

[V8mate]

The problem with salary sacrifice schemes for young people is that it actually lowers your headline salary, which will have a negative effect on things like mortgage multiples, if you were thinking of buying a property.

[vxsmithers]

giggity said:

Hi All,

So up until now I have never been part of a pension scheme as I felt I was "too young" to need to worry about needing to join, now I am half way to 50, (25) maybe I should look into it.

But I am totally lost about it all and do not know where to begin.

I am being offered a salary sacrifice that will allow for Lower contributions and stuff as explained here:

http://www.pensionsadvisoryservice.org.uk/workplac...

My worry is:

What if the government change the pensions and all the goalposts when I finally do get to retirement age and that age changes to say 75 or something.
What if I'm living abroad and retire abroad etc.
What if I decide I no longer want a pension scheme.

.... And various other silly worrys

Im totally lost and not sure if I should join up or not. I know the govt are keen for people to contribute to a pension scheme.

I know plently of info can be found on the web but I am just not sure at this point of my life if I need to bother or if it is worth it..

Need a dummy's guide and some PH help with this stuff please!

You're never too young to start a pension - the earlier you start the longer it has to mature and grow, but you could also lose the lot with a bad provider / high risk portfolio. Anyone who doesn't have a pension is nuts imo unless you have something else in place when you are too old to work - don't assume the state will pay for you if you have nothing. Why would you assume someone else will look after you when you are not able to?

Unless you have a very big inheritance, or decide property / gold / classic cars are a better bet, a bog standard pension from an employer makes sense - you get tax relief so you are paying in before your salary gets taxed, and also, I assume your employer will be paying in too - think of it as a pay rise used to fund your retirement.

to answer a couple of your q's - if the govt increase to 75, so what? it will be a private pension and I doubt they'll increase the minimum age to start drawing from 55 by much, plus its no reason to not start a pension. I don't want to be slogging away until 75!

If you move abroad you can still draw a private pension which is what you'll be starting, nothing to do with the govt.

If you no longer want a pension you stop paying in - the money will still be there when you get to retirment age, you just can't touch it until the minimum age allowable.

Just be careful of the costs of the provider, some are extortionate for what they do, but as you are going into a company scheme any cost will be outweighed by their addition to your pension pot. Also, check what you are being invested in - stocks / cash / property / bonds etc as this will increase / decrease your risk and potential return ( high cash equals low risk and low return, something you may want when you get older to lower risk)

Probably a bit of a rambling response, but I'm no financial adviser, just seen people do very well from pensions, and some do very badly due to lack of understanding of what they actually have.

My company pay in 8% if I pay 8%, and I'm a 40% tax rate payer, so its a no brainer for me to pay in.

[The Leaper]

If you feel you'd like to talk to someone and get information etc, rather than specific 1-to-1 advice, you can phone The Pensions Advisory Service (TPAS) on their helpline 0845 601 2923. TPAS advice etc is completely impartial and totally free. They are a not-for-profit independent organisation (a Quango) financed by a grant from the Department of Work and Pensions. Their website contains lots of information too.

R.

[ss64ii]

Hi
With the salary sacrifice your gross wage will still be the same on your wage slip and most companies will now reconise this. We are going through this at work at the moment. They are finishing the final salary pension and moving to another but are offering the salary sacrific scheme. Most people will be about £400 a year better off on their nett pay.

[V8mate]

ss64ii said:

Hi
With the salary sacrifice your gross wage will still be the same on your wage slip and most companies will now reconise this. We are going through this at work at the moment. They are finishing the final salary pension and moving to another but are offering the salary sacrific scheme. Most people will be about £400 a year better off on their nett pay.

How can your payslip show the same gross pay? You are sacrificing your salary; taking a pay cut on the promise that the pay you no longer earn will be put into a pension scheme by your employer.

[eliot]

Indeed my payslip shows the post sacrifice figure - with no mention of the original gross figure. lenders do indeed only look at your post sacrifice salary, which could be a problem.

[northandy]

V8mate said:

How can your payslip show the same gross pay? You are sacrificing your salary; taking a pay cut on the promise that the pay you no longer earn will be put into a pension scheme by your employer.

Mines salary sacrifice, it shows my gross monthly salary, then a seperate negative deduction.

At the bottom of my payslip it shows my gross annual salary prior to any deductions.

[pherlopolus]

northandy said:

Mines salary sacrifice, it shows my gross monthly salary, then a seperate negative deduction.

At the bottom of my payslip it shows my gross annual salary prior to any deductions.

same here, but we have a flexible benefit 'pot' to spend on top of Gross. all works out, a IFA should be able to work it out...

[westberks]

for salary sacrifice to work in the eyes of the revenue your gross salary does reduce; but your net income remains the same with a higher pension contributions being made in leiu of the NI contributions you save.

If your bosses are being very generous they will also pay in the NI that they save as an extra contribution.

[Eric Mc]

How these salary sacrifice schemes are shown on payslips can vary from employer to employer. As has been described above, some payslips will show the Gross Salary as being the Gross Salary LESS the pension amount deducted. Some payslips will show the Gross Salary BEFORE the pension amount is deducted.

The key legal documents for proof of salary are not the payslips but the P60 or the P45 and they will ALLWAYS show the Gross Salary AFTER the pension amount has been deducted.