Salary Sacrifice - anyone do it?

[funkyg]

My employer is just about to introduce a new salary/pension scheme called Salary Sacrifice.

As far as I can get my head round, they reduce the gross amount that they pay you and the savings that are made in tax and NI are then invested into your current pension fund, leaving you with the same take home pay but an increased monthly pension contribution.

It sounds a bit too good to be true to me (Free money? Sure I'll have some), but after a little reading up it does sound legit and a good idea.

Anyone here heard of it or use it even?
I only have until the 20th March to opt in for it, but can only get an appointment with the pension advisor at the end of the month.
Cheers.

[russbeer]

It sounds like you can't really lose doesn't it? If you still get the same take home pay, then its your contributions (contributions = what the government steal from you!) that are paying for it? Whether you get to see the difference in later years will remain to be seen i guess.

[CzarJunkie]

I don't know anything about it, but the word 'sacrifice' suggests you giving up something.

[kronas]

sounds to me as if you waiving your right to a pension or topup of your pension from the state and trusting a company to pay you in years to come, to be honest i would seek advice from the person in charge of the payroll/company on what this is about, then seek indipendent advice, if it was me i would steer clear!

[Soulassassin]

We had summit v.similar a couple of years back except insted of the pension getting more money it was our pay that went up.

'Smart pensions' or salary sacrifice

This is an increasingly popular device to reduce the cost of pensions. Essentially, it involves employees' salaries being reduced by the amount of their pension contributions and those contributions instead being paid directly by the employer.

With the cost of pensions rising this device can make a small but very significant contribution to the affordability of pensions.

The reason for doing it is that the lower level of pay means National Insurance contributions are reduced both for employers and employees. The total savings amounts to about 20% of the value of the pension contribution which, if nothing different was agreed, would be divided equally between the employer and employee. This means employees take-home pay is increased as compared to the pre-sacrifice situation.

Taken from here

[kronas]

i have just lookied it up, might be ok, but check with the employer though!

http://www.sharingpensions.co.uk/cor...its_salary.htm

[ka$h]

Salary sacrifice means you give up a cash value off your salary say £3k per annum so your take home will reflect this drop of £3k, but what happens is you get £3k back in another form (in this case pension) without paying the tax on it. Therefore by sacrifice this benefit you get the whole £3k into your pension instead of £3k less income tax in your monthly which you would then pay £3k into your pension. Basically you would be £630 (approx) a year better off on £3k sacrifice than you would be taking all your salary and paying out £3k into a pension.

The scheme is often centered around childcare vouchers so you get the full £3k worth of vouchers, whereas if you bought the childcare out of your salary, it would cost you £3,630

Confused? You will be. Hope fully I have explained enough, if not, ask and I will try to explain better when the kids are in bed (10 minutes!)

[funkyg]

I sent the pension guy an email last night, and he got back to me this morning. His reply was it's win-win for me and my employer. The company save tax, and I save tax which goes into my pension. The company still make the payments to my directly to my pension fund, so it's not like they are keeping it for me so the money is safe.
My take home is still the same. Apparently the few that wouldn't benefit are women on maternity (as their maternity payments would be based on the lower gross salary), and those on a very low wage.
All in all, it seems a good plan, and I think I'm going to take them up on it.

[Over Carl]

I'm in a rush so haven't had time to test it properly - thought I had it but seen my mistake and haven't got time to fix it.

However, you need work out with salary increases in future, will you still be better or worse off or still the same. A simple excel sheet should be able to show you.

[bob_g]

My employer moved virtually all our UK people over to this, as of 1st Jan. Also offered various extras such as childcare vouchers, health insurance etc that could also be "sacrificed" (e.g. salary dropped by £X but company pays £X for the item) in this way to save Tax and/or NI. Apart from confusing lots of our people (the tax rules and conditions are a bit arcane), it is pretty win-win.
Bob.

[kracken]

http://www.hmrc.gov.uk/specialist/salary_sacrifice.pdf

usefull info

[blacksheep]

With us the salary sacrifice means you don't pay tax, but NI still comes out. If we put our bonus in then no tax or NI.