Salary exchange (sacrifice) / non-cash benefits.

Soldato
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My company is offering a salary sacrifice in exchange for a non-cash benefit, in this case an increased contribution to your pension based on the sacrifice amount. On the face of it, it seems like an obvious blag to lower your and your employer’s tax and NI payments.

I'm not terribly keen if I'm honest; morally I'd rather pay and my company pay their full dues when it comes to NI contributions considering the state of our cash-strapped NHS. The benefits to me, the employee seem minimal as a tax relief considering other factors like multipliers for pension contribution, overtime, life insurance etc when lowering your cash remuneration.

I suspect I'm missing the full pro and cons here. Anyone else been through this or have experience with this process.

Cheers!
 
Soldato
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This is a normal company benefit. I have salary sacrifice with my employer for childcare vouchers. As a higher rate tax payer i receive no child benefits so happy to pay less tax for this.
 
Soldato
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With the pension top-up contributions you'll pay tax on it when you take your pension (assuming it's over the tax threshold at the time). It's to encourage people to plan for their future rather than relying on the smaller pension they'll get having paid the minimum amount in through their working life.

As for other salary-sacrifice benefits, many of them actually result in a reduction in your tax code so you end up paying a bit more tax anyway. This isn't true in all cases but it does happen.
 
Soldato
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Hmm; my pension contribution is 15%, a combination of employee and employer based on my current cash remuneration. The non-cash benefit takes the form of a pension contribution only. in my case it seems a fudge to get a few extra pounds take-home now and contributing slightly less tax and NI (the employer reduces their contribution too).

I'm also a higher tax payer but child-free!
 
Associate
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Salary sacrifice is extremely common now for pension contributions (in fact its so commonplace I'm surprised there are organisations which haven't implemented it yet). Given the massive uncertainty over future state pension arrangements + future tax grabs on personal pensions I'd be inclined to take every bit of extra pension contribution possible...
 
Soldato
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I confess when doing the calculations, it's marginal when it comes to the actual benefit gained. A reduced cash remuneration means that 15% pension contribution is now also reduced. The non-cash benefit in the form of an employer pension contribution appears to cover that shortfall. Multipliers based on the reduced cash remuneration are also now affected like holiday, overtime rates etc.

Perhaps I'm being short-sighted :)
 
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Depending on the employer you can also receive a NI rebate from them. i.e. they are saving 13% NI on your reduced salary they may decide to rebate 10% of this back to you as additional pension contribution. It is very common for group personal pension schemes to be setup on a salary sacrifice basis these days. However, beware if looking to purchase a property as your reduced salary would be used for affordability.
 
Soldato
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Depending on the employer you can also receive a NI rebate from them. i.e. they are saving 13% NI on your reduced salary they may decide to rebate 10% of this back to you as additional pension contribution. It is very common for group personal pension schemes to be setup on a salary sacrifice basis these days. However, beware if looking to purchase a property as your reduced salary would be used for affordability.
Not in this instance. The employer is simply calculating the non-cash benefit amount based on the current employer and employee percent contributions (15%) of the current or reference cash remuneration, this is classed as the salary exchange amount. Employees net pension contribution then becomes zero and on paper it appears to be an entirely employer only pension contribution system.

I see a few extra coins per month as the lower cash remuneration attracts less tax and NI contributions.

Eh; I have another 30 days to confuse myself further with it until I need to decide on a course of action.
 
Associate
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it is exclusively a non-cash benefit pension contribution where there isn't seemingly an increase in the actual pension contribution.
If they are not making an increased contribution too, then I don't see the point if it is reducing your other benefits.

If you'd like to make additional investments in a pension, you can do that yourself with your net salary through a Sipp and obtain tax relief. In your case it seems like this would be more beneficial.
 
Soldato
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My company is offering a salary sacrifice in exchange for a non-cash benefit, in this case an increased contribution to your pension based on the sacrifice amount. On the face of it, it seems like an obvious blag to lower your and your employer’s tax and NI payments.

I'm not terribly keen if I'm honest; morally I'd rather pay and my company pay their full dues when it comes to NI contributions considering the state of our cash-strapped NHS. The benefits to me, the employee seem minimal as a tax relief considering other factors like multipliers for pension contribution, overtime, life insurance etc when lowering your cash remuneration.

I suspect I'm missing the full pro and cons here. Anyone else been through this or have experience with this process.

Cheers!

Very common and entirely appropriate. There is no moral question to answer - the scheme is approved and allowed by HMRC. If you want to pay more to the exchequer to ease your conscience I'm sure there are other ways.
 
Soldato
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I understand it's a scheme sanctioned by HMRC. I'm just rather bemused in the way this specific company has applied it. Looking at the details it seems to benefit the employer more in the way of NI relief than it would me. Yes, my pension contributions would remain exactly the same, yes, I would see a few extra quid per month in my pay packet BUT holiday, overtime and other multiplier calculations would suffer as the base remuneration is reduced due to the salary exchange (sacrifice).
 
Caporegime
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You don;t avoid taxes, merely deffer the period when you will pay taxes. When you withdraw your pension you will pay taxes then, albeit at a lower rate typically.
 
Associate
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I understand it's a scheme sanctioned by HMRC. I'm just rather bemused in the way this specific company has applied it. Looking at the details it seems to benefit the employer more in the way of NI relief than it would me. Yes, my pension contributions would remain exactly the same, yes, I would see a few extra quid per month in my pay packet BUT holiday, overtime and other multiplier calculations would suffer as the base remuneration is reduced due to the salary exchange (sacrifice).

Are you sure you’ve got the scheme right?
 
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If you pay higher rate tax then you should be increasing your pension contribution and taking salary sacrifice benefits (if you want them) to lower your tax bill. Do the math, it's pretty silly not to take advantage of it.

If you're not a higher rate tax payer then meh.
 
Associate
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I get all of that. I'm querying the way in which the salary sacrifice scheme is being offered.

As far as I can tell, yes.

Ours is salary sacrifice based, but the way the scheme is set up it looks like the full contribution comes from my employer and there is a zero contribution from me. However the larger the percentage contribution I agree to be taken out of my salary the larger the contribution made by my employer.

I save tax and NI, my employer saves employer NI and gives me 50% of this saving back as an increased contribution.
 
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