Discussion
Eric Mc said:
djones123 said:
In new job offer, company is offering a non contribution pension upto 5%.
So your new employer is offering to pay into a pension scheme on your behalf?And you don't have to make any contributions yourself?
Eric Mc said:
djones123 said:
In new job offer, company is offering a non contribution pension upto 5%.
So your new employer is offering to pay into a pension scheme on your behalf?And you don't have to make any contributions yourself?
Of course for this to happen the employee needs to agree to take a slightly lower base salary than what they would get if you were in a normal employee-contribution scheme, but even with a slightly lower base, with the savings made their net pay should still increase.
My employer is in the midst of rolling this out.
The key thing is the employee being willing to accept a lower net salary. All schemes that imnvolve any sort of salary sacrifice depend on this. Although there will be tax and Employee NI savings for the employee (and even bigger Employer NI savings for the employer - which is why they like such schemes) the employee does need to be prepared to accept a lower gross salary. This could have repurcussions for an employee when negotiating salary increases or borrowing.
Why should an employer want to go down the salary sacrifice route with pension contributions? I thought that payments by an employer into a pension scheme on behalf of an employee would not be subject to PAYE Nenefits in Kind or NIC charges.
Why should an employer want to go down the salary sacrifice route with pension contributions? I thought that payments by an employer into a pension scheme on behalf of an employee would not be subject to PAYE Nenefits in Kind or NIC charges.
Eric Mc said:
Why should an employer want to go down the salary sacrifice route with pension contributions?
I don't sense from the OP's question that he is talking about salary sacrifice, so I think this is a red herring. Such schemes normally offer a range of benefits and you pick the ones you want. For the employer it constrains their total payroll cost.
My initial reply was perhaps unkind, but I find it amazing that someone clever enough to get a job on £40K base can't figure these things out.
Eric Mc said:
This could have repurcussions for an employee when negotiating salary increases or borrowing.
Not from what we've been told; the lower gross salary is applicable to the pension calculations only; for all other actions (annual reviews, promotions, loan applications etc) the "true"/higher/original base salary figure remains in affect. It's a bit like pre-tax Childcare Voucher deductions; someone earning £40k agrees to redeem £2k of that in pre-tax CCVs, thereby effectively lowering their gross pay by £2k so that the payroll monkeys can accurately apply tax and NI to the rest of their applicable pay. Whilst taxable pay is £38k, any future promotions, or proof of salary, is based on the £40k figure. Same theory applies to these new pension schemes, or so we've been led to believe.
But as DL says I think we've been thrown a red herring with this one by the OP - its probably something completely different.
CurvaParabolica said:
Not from what we've been told; the lower gross salary is applicable to the pension calculations only; for all other actions (annual reviews, promotions, loan applications etc) the "true"/higher/original base salary figure remains in affect.
HMRC wouldn't be happy with that.http://www.hmrc.gov.uk/specialist/salary_sacrifice...
CurvaParabolica said:
Not from what we've been told; the lower gross salary is applicable to the pension calculations only; for all other actions (annual reviews, promotions, loan applications etc) the "true"/higher/original base salary figure remains in affect.
It's a bit like pre-tax Childcare Voucher deductions; someone earning £40k agrees to redeem £2k of that in pre-tax CCVs, thereby effectively lowering their gross pay by £2k so that the payroll monkeys can accurately apply tax and NI to the rest of their applicable pay. Whilst taxable pay is £38k, any future promotions, or proof of salary, is based on the £40k figure. Same theory applies to these new pension schemes, or so we've been led to believe.
But as DL says I think we've been thrown a red herring with this one by the OP - its probably something completely different.
The employer will always try to "sell" a salary sacrifice scheme as they are the greater beneficiaries of such schemes. You do need to be aware that their "advice" will never be completely impartial - although some are more honest than others.It's a bit like pre-tax Childcare Voucher deductions; someone earning £40k agrees to redeem £2k of that in pre-tax CCVs, thereby effectively lowering their gross pay by £2k so that the payroll monkeys can accurately apply tax and NI to the rest of their applicable pay. Whilst taxable pay is £38k, any future promotions, or proof of salary, is based on the £40k figure. Same theory applies to these new pension schemes, or so we've been led to believe.
But as DL says I think we've been thrown a red herring with this one by the OP - its probably something completely different.
I have been told that company will contribute 5% in pension even if i don't contribute anything but if i contribute upto 5% then company will contribute 7.5%.
There is also a Private Medical care benefit which is optional and i would have to pay tax on that if i take it. At the moment i don't know about the complete details of this benefit.
Gassing Station | Jobs & Employment Matters | Top of Page | What's New | My Stuff