Salary sacrifice

Author
Discussion

Nicol@

Original Poster:

3,850 posts

242 months

Friday 26th February 2010
quotequote all
Pensions are starting at work.

The advisor arranging this is pushing the salary sacrifice.
I remember it was mentioned in an old thread here.

Is the sacrifice a problem if you want a new mortgage, maternity leave etc?
Reading up on a few websites gives me the impression that the sacrifice has disadvantages for some people, but the advisor didn't agree.



Edited by Nicol@ on Friday 26th February 15:19

cs02rm0

13,812 posts

197 months

Friday 26th February 2010
quotequote all
Sounds like balanced advice.

Rarely in finance is there one certain path to reaming in the millions.

Tiggsy

10,261 posts

258 months

Saturday 27th February 2010
quotequote all
The issue you have read up on....and one that most advisers ignore, is that your salary is lower! It's largely as simple as that...any benifits linked to "pay" will be based on the new, lower, salary. Whether thats a bog deal depends on your pay (now and after)

The big saving for sal sacrafice is the employeer who saves a lot of NI.

-Pete-

2,905 posts

182 months

Saturday 27th February 2010
quotequote all
I do salary sacrifice for my pension and childcare. You save some tax (a lot if you're 40%), and my employer is willing to write a letter stating your gross salary is unchanged (not that mortgage companies check). You have nothing to lose, IMO.

Eric Mc

122,685 posts

271 months

Saturday 27th February 2010
quotequote all
And if you are looking for a new job at some point? Your P60 will show a comparatively low Gross Salary. What do you do to prove your current remuneration to a prospective new employer?

Salary Sacrifice works when the government decides that a certain payment or service provided by an employer to the employees will be tax free. In the past we have had tax free arangements for -

profit related pay
computer supplies
pension contrivbutions
child care

These are all politically motivated and relate to the social engineering reqyuirements of the government in power.

Tax free profit related pay and pension contributions were introduced by the Conservatives. Tax free computers and child care were intoduced by Labour.

When these schemes are introduced, it is usually not intended that employers actually CUT employees' pay in ordetr to obtain tax advantages for the employer.
When employers start doing this, it often signals to the government that the scheme is being abused and it leads to the scheme being withdrawn. The Computer and Profit Related Schemes were all ended because of employer "abuse".

Tiggsy

10,261 posts

258 months

Saturday 27th February 2010
quotequote all
-Pete- said:
I do salary sacrifice for my pension and childcare. You save some tax (a lot if you're 40%
But for pension you would get tax relife on your net pay so the saving is NI not income tax.

Eric Mc

122,685 posts

271 months

Saturday 27th February 2010
quotequote all
Salary sacrrifice mainly BENEFITS THE EMPLOYER - with SOME tax and NI savings for the employee.

Cartard

87 posts

176 months

Saturday 27th February 2010
quotequote all
Railway have just introduced what is called a smart pension,

Headline salary - current pension payments = new salary

Work pays the pension payments

You are told you are better off due to less NI etc

Work banks 8m / yr but doesn't put it in the pension pot.

Eric Mc

122,685 posts

271 months

Saturday 27th February 2010
quotequote all
Why do YOU have to take a salary cut for THEM to contribute to your pension?

Employers have been able to contribute to employee pension schemes for years. They are keen to reduce YOUR gross salary so THEY don't have to pay Employer's Class I NIC.

Nicol@

Original Poster:

3,850 posts

242 months

Saturday 27th February 2010
quotequote all
Does the salary sacrifice have any impact on your state pension?

Eric Mc

122,685 posts

271 months

Saturday 27th February 2010
quotequote all
No.

State pension is based on the number of years you pay your National Insurance contributions, not the actual amount yuou have paid over your working life.

Cartard

87 posts

176 months

Saturday 27th February 2010
quotequote all
Eric Mc said:
Why do YOU have to take a salary cut for THEM to contribute to your pension?

Employers have been able to contribute to employee pension schemes for years. They are keen to reduce YOUR gross salary so THEY don't have to pay Employer's Class I NIC.
Unsure whether that q was for me?

Pension payments are summats like 50% employee 50% employer to a certain level so with the cut the company will pay 100% of the pension payment.


LeoSayer

7,364 posts

250 months

Saturday 27th February 2010
quotequote all
Eric Mc said:
Employers have been able to contribute to employee pension schemes for years. They are keen to reduce YOUR gross salary so THEY don't have to pay Employer's Class I NIC.
I have heard of firms that pass those savings into the employee's pension.