Salary sacrifice to be taxed

Thank God for the posters on this thread who actually know what salary sacrifice means!

I have seen loads of comments on MN posts where posters use SS to reduce on paper what their salary is, to be able to stay in a lower tax band. Particularly at the higher end with cliff edge tax differences. Smoothing out these cliff edges would be a good thing in my view. As would getting rid of NI altogether and just roll into an income tax, that covers all forms of income.

Some of the ageist, anti pensioner, anger and comments on here are appalling.

Who brought in the 62% marginal tax rate?

A nominal NI should be levied on pensions income. Pensioners don't stop using services once they retire.

I encourage everyone who is furious about this and how damaging it will be to the economy to write to their MP and tell them it is unacceptable.

I am very concerned about the financial burden for our children to support a top heavy aging population.

Why should health boards and Local Authorities be allowed to make 25-30% contributions to defined benefit schemes on behalf of their employees free of national insurance but private sector organisations who want to contribute to their employees’ pensions be charged national insurance on those? It’s disgusting.

Do I have to have a salary sacrifice scheme to think it’s wrong? It’s a stealth tax. It’s backhanded and sneaky and not what I voted for.

To clarify, I mean their employers. So that this NI has to be paid out by health trusts and schools etc and the Government has to admit that since this will make an extremely large hole in their finances that they can’t sustain on their current budgets they can hardly expect private sector organisations to do the same.

No, they should make all pension contributions exempt from NI as well as income tax and they should apply NI to pensioner’s incomes now.

It is absurd for pensioners not to be paying NI on their incomes when supposedly (haha) it is meant to fund the very services of which they are by far the highest users and for which they, as a cohort, have paid nowhere near enough tax to fund over their lifetimes.

It is quite clear that not only does the triple lock need to end as it’s completely unjustifiable at this point, but also the state pension itself needs means-testing.

This is inevitably going to happen and it should be happening immediately. No further taxes should be raised on people of working age or businesses at all because this will further suppress any prospect of economic growth or increased productivity. It would raise £80-90bn per year to means-test the state pension and cause no financial hardship whatsoever which can be redirected to productive areaso of the economy such as education, infrastructure and industrial strategy, which have been starved of necessary investment for decades because of this largesse to pensioners.

In order to manage to impact of the inevitably lower pensions for those who are currently working aged the Government must encourage pension saving, not remove incentives for anybody (employers or employees) to contribute above the legal minimum (which is far too low). The opt out also needs to be removed and minimum contribution levels gradually raised with a similar scheme for the self-employed.

This is utter economic incompetence which will entrench generational unfairness further, further disincentivise prudent saving, reduce economic activity and economic growth, result in reduced employment participation and increase skills shortages (and therefore also increase the need for immigration).

https://www.abi.org.uk/news/news-articles/2024/10/millions-face-poorer-retirement-if-chancellor-levies-national-insurance-on-pension-contributions-in-budget/
^^
”REBA, an organisation representing nearly 2,000 of Britain’s largest employers, surveyed their members about their likely reaction to a Budget announcement imposing NI on pension contributions made by employers
^^
The survey found that the removal of employer NI relief could have long-term detrimental effects on workers’ pension savings. Three quarters of employers who answered the survey pay contributions greater than the auto-enrolment minimum. Nearly half (42%) of them would reduce these more generous contributions, and two thirds (63%) would be less likely to increase contributions in the future. Many would stick to the minimum required contribution in future. A reduction in investment in other areas of employee benefits, as well as reviewing their future approach, was also mentioned. Only 40% would try to retain current contribution levels despite the increased cost.”

Yep, but they won’t.

Who is there to even vote for anymore. Labour protect the non-working, Tories protect the rich and reform protect the racists.

Salary sacrifice for income tax is deferring tax (differences in earnings pre and post retirement often mean that the individual does legitimately avoid some income tax if they csn use it to slip back under a threshold). However you don't pay NI once over state retirement age do this bit of taxation gets avoided entirely.

Personally I'd prefer that they merge NI into income tax to close a few loopholes.

How much are you paying into your occupational pension?

Also if they are going to apply NI to pension contributions via salary sacrifice then they’d damn well better also apply them to the employee contributions into the public sector DB schemes as well and hit all the doctors, nurses and teachers with the same tax charge as everyone else.

I’m not taking about the law, I’m taking about your assumptions about @LBFseBrom ‘s pension.

It’s an indisputable fact that many boomers had better pensions, which are not feasible for much of today’s workforce.

Precisely. It won’t be employers that pay for the element that will be charged to them: employees will pay for it as always, via lower salary rises, reduction in any employer pension contributions above the legal minimum level, and lower hiring by businesses so fewer jobs being available.

Employer contributions became mandatory in 2018 for all people.
That is not an assumption, that is a fact
Today however prople who work do so with the full knowledge that they will have some sort of private pension also funded by their employer
There is no denying the fact that this is a huge benefit to future generations in their retirement years

I have no idea who has pip easily but my son is severely autistic , in his 20s non verbal needs help with everything , has no notion of danger can’t leave the house unattended even to go to the car etc . His application for pip was extremely hard , he had a in person interview , because I said he could open a yogurt pot they lied and said he could cook for himself , as an example of the lies c there where many . It was a massive stress and far from easy . Who are all this people getting high rate mobility this easily ?

Yes, sure.

But if even one person wanted to opt out, the employer has to enable that. So they have to have a "normal" scheme running as well, for auto enrolment reasons.

Obviously you work in a white collar position. Where I work, we have around 3,000 staff, of whom well over 2,500 are on minimum wage. And that's not that unusual. So if I did introduce sal sac it would be for management only.

One place I worked I capped sal sac at 25% of salary. You could pay more in, but it would not be a sal sac contribution. The reason for this was because before I joined someone had sal sac'd 80% of their salary for two months then gone on mat leave and the employer had to keep up those contributions for the whole year. Because that's the impact of salary sacrifice.

Double post, iPhones are awful.

From The Times:

The one exception to this bad news on pension saving, as is so often the case with this government, is the public sector.

Public sector employees enjoy generous defined benefits schemes, where the bulk of the costs are borne by their employer. Typical employer contribution rates are about 25 per cent of pay, compared with about 6 per cent in the private sector.

Generally, public sector schemes only use salary sacrifice for additional voluntary contributions, where the contributions are optional and tend to be much lower and therefore less likely to breach the proposed £2,000 ceiling.

This is Labour robbing the private sector to pay the public sector. Disgusting.

Someone knows what it is all about, thank god!

I definitely don't think it will make much money for the govt.

From The Times:

Salary sacrifice arrangements, as The Times reported on Friday, could be capped to pension contributions of a maximum of £2,000 a year.

Consistent with the government’s confused logic of what constitutes a “working person”, this is most likely to affect those on medium to higher salaries. Someone on a salary of £30,000 a year is unlikely to be able to put £2,000 of their own money into a pension every year. By contrast, someone on £100,000 is much more likely to be able to sacrifice £2,000 or more to put into their pension.

Most likely, it is going to hit pension saving. With the removal of the incentive to defer consumption, people are more likely to favour taking the money in their pay packet now. Up and down the country, millions of workers struggling with the cost of living are also trying to put money aside for their retirement. By any measure, this news is going to make their lives worse.

Can you take a picture of the worked example in your paper copy?

No. It's not that at all.

Do you have a salary sacrifice scheme then? Most people don't. I don't and didn't with my last two employers either.

Is this people earning over 50K who want to put funds towards their pension to avoid paying taxes on that extra money?

I think that is awful that as soon as you earn a half way decent salary teh government want to take half of it. 50 K is hardly rich is it?