Bonus Sacrifice
Author
Discussion

x5x3

Original Poster:

2,437 posts

283 months

Friday 1st February 2013
quotequote all
My employer has offered a bonus sacrifice scheme, so instead of taking the cash (less tax and NI) I can pay all or some of it into my pension, I already do salary sacrifice so I think I understand the maths but hopefully someone could confirm this simple calculation please?

e.g. Higher rate taxpayer £10K bonus, less tax (£3920) and NI (£200) is £5,880.

for the bonus sacrifice the employer will add 13.8% (their cost) so the total net sum into the pension would be £11,380, which grossed up is £18,967.

Is this correct or have I missed something?

Thanks in advance.

mx stu

837 posts

253 months

Friday 1st February 2013
quotequote all
x5x3 said:
My employer has offered a bonus sacrifice scheme, so instead of taking the cash (less tax and NI) I can pay all or some of it into my pension, I already do salary sacrifice so I think I understand the maths but hopefully someone could confirm this simple calculation please?

e.g. Higher rate taxpayer £10K bonus, less tax (£3920) and NI (£200) is £5,880.

for the bonus sacrifice the employer will add 13.8% (their cost) so the total net sum into the pension would be £11,380, which grossed up is £18,967.

Is this correct or have I missed something?

Thanks in advance.
No need to gross up, £10,000 is gross.

Total going into your pension will be £11,380.

I tend to sacrifice bonus into pension, if you weren't expecting it then might as well forget about it and save some tax.

Jockman

18,414 posts

190 months

Friday 1st February 2013
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mx stu said:
I tend to sacrifice bonus into pension, if you weren't expecting it then might as well forget about it and save some tax.
Hopefully save some tax - all depends on your tax bracket when you come to draw the pension smile


Olf

11,978 posts

248 months

Saturday 2nd February 2013
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I have one rule with money - take what's your's when it's offered IN CASH.

I get offered a similar scheme, bonus into shares - I take the cash.

Zigster

2,004 posts

174 months

Saturday 2nd February 2013
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As mx stu says £11,380 goes into your pension. Net cost to you is £5,880 (i.e. £10,000 - £3,920 - £200).

Most 40% tax payers (6 out of 7?) do drop down to basic rate when they retire so there is a genuine tax saving assuming that current rates are a good guide to future rates. Plus, the NI saving (especially given your employer is being quite generous in giving all of their NI saving) is a real incentive.

Out of interest, why £3,920 of tax? Why not a round £4,000? (Apologies if the answer is obvious - I'm coming out of a nasty viral infection so feeling a bit woozy.)