Salary sacrifice to be taxed

You can’t double tax it - that would lead to revolt.

im fed up of the pensioners dictating how the country is run, leaving the rest of us to slave away for absolutely no reason.

Maybe Labour should stop floating every sodding idea they have in the media. Then we could stop considering each idea as it pops up! 🤷‍♀️

It's a silly argument. That money ends up getting taxed when you take it out of your pension pot - it's not tax avoidance! So the change here would just remove an incentive to save up for private pensions, leaving more people with little savings down the line. Honestly I've had it with Reeves.

Yeah the only way it’ll work is if they stop taxing pensioners.

I can just imagine all the greedy gits rubbing their hands in delight.

Surely you will still be able to pay extra into your pension? You simply won't be able to do it as a means of avoiding tax? 🤷

There are, basically, two ways to deduct pension at source by an employer.

1. employee nominates amount for pension, that is taken from their pay on pay day, their take home is reduced. It's taken before tax. Therefore, for a basic rate tax payer putting in £100 costs them £80. Employer pays, say, £60 and they pay no NI on that element so it doesn't cost them £60 as such.
   Employee contribution is £100, employer contribution is £60.
   This is what the majority of schemes do.
   
   It's a payroll deduction, but it's not salary sacrifice using the HMRC rules.

2. salary sacrifice. Your salary is £50k. You want to pay £2k pa into your pension. You enter into a different contractual arrangement with your employer whereby your employer reduces your salary to £48k, and you get a letter explaining that. It is a contractual change.
   Then, the employer makes a £2k pa contribution to your pension scheme. And adds their own contribution of £200.
   £2,200 is ALL an employer contribution . There is NO employee contribution.
   As a result of this, both parties now save the NI. The employer saves it on the full contribution instead of just their bit, and the employee saves it on what is just an employer contribution, increasing their take home pay by the NI element of the £2k. Both parties are better off.

I'm definitely not wrong. I have introduced these schemes to employers.

I can appreciate that people use the term incorrectly though.

Where you say "all relevant taxes", you're simply using irrelevant words. It's tax. Tax is saved. Unless you use sal sac, then NI is saved as well.

But there are a lot of other rules around sal sac and the admin burden for the employer is a lot higher.

So, what RR is suggesting, is limiting the NI saving in my 2) to the first £2k pa. Which, to be quite honest, won't impact that many people.

But I suspect the reason she is considering it is because more employers are thinking that the admin burden of sal sac is more worth it with the recent NI increase.

All this information is available on the internet. Especially the HMRC website.

And there are plenty of other posts on this thread that have explained it. So maybe read all that before making a tit of yourself.

Sorry you are incorrect. This is exactly what salary sacrifice is!

Salary : 10k
Pension: -£1k
New salary: :£9k

Every employer in my life has used salary sacrifice for pensions. It means paying all relevant taxes on £9k and not £10k. There are a number of proposals out there regarding what happens to that £1k your salary has been reduced by!

Basically, you are talking about a company pension that is deducted at source by payroll.

That seems to be the distinction you are drawing between that and making your own payments (and reclaiming on a tax return).

But that is NOT what salary sacrifice means. It's a different type of scheme. It looks the same on the surface, but there is a different set up, different rules, more admin, and you save NI as well as tax, which you don't with a "normal" company pension.

I'm afraid, as I have been trying to tell you, you're talking about something totally different.

But - the good news is, if this change comes in, it won't affect you. Yay!

If you don’t understand that trying to estimate the contributions that would be required to generate a specific level of income in retirement while ignoring the impact of investment growth makes your calculation entirely meaningless and wrong by orders of magnitude then I am not sure trying to “tell you about maths” would be a productive use of my time. My primary school aged children understand compound growth.

The proposal was to means test it. It wouldn’t be removed from anyone unless they had separate means exceeding the average UK full time salary of £37,500. If you will have a private pension of that size why on Earth do you think you should be able to claim hundreds of thousands of pounds in welfare?

Because to get pension of this size on DC using SWR I'd have to have about 950k in my pension pot. Assuming 45 years of working life I'd need to save over 20k annually (I'm removing inflation /investments growth/ pension charges to simplify my point).

To be able to save such amounts I need to be a higher earner which means I'm already taxed through the roof.

You're making the same mistake which RR does - you believe that just because people have something you can take it away from them and they will oblige. Doesn't work like this.

tell me about maths 😂

your point about random amount of 37500 makes it educated though

anyway, this won't happen no matter how much you're trying

Guess what makes it even better? They’re doing it because they want to pay the state pension for five years after someone dies.

https://x.com/independent/status/1987505984332292301?s=46

a lot of you will call it “ageism” but this is entitlement plain and simple. No other generation gets as many handouts from the government than the current pensioners.

Guess what makes it even better? They’re doing it because they want to pay the state pension for five years after someone dies.

https://x.com/independent/status/1987505984332292301?s=46

a lot of you will call it “ageism” but this is entitlement plain and simple. No other generation gets as many handouts from the government than the current pensioners.

A) this is just the scheme that most of us are enrolled in by our employers, we’re not trying to avoid anything

B) less money in the rest of your pay packet means less money people can afford to put in their pension.

Taxing something you want to incentivise is bad.

The proposal was to means test it. It wouldn’t be removed from anyone unless they had separate means exceeding the average UK full time salary of £37,500. If you will have a private pension of that size why on Earth do you think you should be able to claim hundreds of thousands of pounds in welfare?

Because to get pension of this size on DC using SWR I'd have to have about 950k in my pension pot. Assuming 45 years of working life I'd need to save over 20k annually (I'm removing inflation /investments growth/ pension charges to simplify my point).

To be able to save such amounts I need to be a higher earner which means I'm already taxed through the roof.

You're making the same mistake which RR does - you believe that just because people have something you can take it away from them and they will oblige. Doesn't work like this.

I haven’t read all these posts but do you know what? I am sick of all this whinging. No one knows exactly what will be in this budget despite all the right wing rags stirring up as much hysteria as possible. I and my husband while not remotely wealthy as middle earners may well be in the firing line and he may need to put back his retirement. But you know what? Labour were voted in to change things because people were sick of the collapse of essential public services and the economy so stop whining when they are trying to do this against a horrendous back drop of global problems and 14 years of austerity. Yes they may get it wrong in which case you can vote them out in four years. I can more or less guarantee that the various replacements currently on offer will not do any better. Cut them some slack and let them at least try. Hopefully the poorest in our society will be protected and the rest of us need to reflect on why we think it is possible to make things better without any money!