Salary sacrifice to be taxed

[SomethingInTheAirToday]

https://x.com/politlcsuk/status/1986914552093745592?s=46

not only are my generation not going to have a state pension or private healthcare, but we also can’t save into our own pensions because we need to fund the current generation.

this makes me so angry

Why do you despise social workers and charity workers?

If NI isn't something you give much thought to, and all your posts have been about tax.....why are responding to posts about salary sacrifice, which is all about NI and nothing to do with tax?

Anyone who pays into a pension is in the same tax position regardless of whether they pay through their employer or make the payments directly themselves.

Everyone is not in the same position with regard to NI, if their employer offers salary sacrifice, which we have shown most do not (and DB schemes don't, and min wage workers can't use it, etc etc).

But you don't need salary sacrifice to make extra pension contributions. Sarary sacrifice means you save on NI. If you don't want to save the NI contributions don't use salary sacrifice.

Some do use sal sac, I don't know why the pp said none do. Most public sector don't.

I think my old Boots one did actually but it was years ago and I can't quite remember. I know it was opted out of SERPS.

Some of the public sector ones may be set up like that but not all.

Well, they literally never stop whining.

Look at everyone whining on this thread when 95% of them don't even know what they are whining about!

(I count myself amongst the 'wealthy', by the way)

I think we're all aware that inheritance tax planning exists. This isn't news.

Simplicity, the same as most people. Log into work benefits system, increase % amount, job done. Much easier than claiming it back on my tax return.

You are being ridiculous. Of course salary sacrifice relates to tax. It’s a much simpler process than reclaiming via a tax return. Log into company benefits system, increase (or decrease) % contribution amount, job done.

After re-reading the ‘proposal’ , a HR tax payer would have to pay £200 NI on every £10k they sacrifice down to £50k taxable income.
It’s hardly going to break the bank and there can’t be very many people sacrificing £50/60k if they can afford that, they can afford to pay £1000-£1200 in NI.

And to add, the person that I originally responded to was trying to argue that salary sacrifice was a TAX dodge. Which I why I responded that the tax position was the same under both. It didn’t change the rules on the taxation of pension contributions, but it did make it simpler to claim.

I think Labor understood that they are a one term government and won't be back for decades to come (I hope not in my lifetime anyway) so they are trying to get money now stealing from future generations.

This pension taxation will reduce pension pots of those who are younger now and thus making more people state dependent in old age.

Op, I agree. It's disgraceful.

When you say private healthcare - is this because you're worried NHS care is not good enough? I agree it's not..but shouldn't the government's aim be to improve the NHS so private healthcare isn't the go-to option? Pipe dream at the moment, though..

It's not even that much. It only kicks in after £2k has gone in. So, if you're working on the higher pay level NI which is 2%, then it's £160.

Of course, once it takes them below the higher NI rate, it's 8% though.

But, it's under half of schemes that use it. And not many people save more than £2k a year, etc.

If your firm allows you to log into the portal and change your contribution % then it simply cannot be salary sacrifice. And, funnily enough, you have identified one if the reasons some firms prefer not to use it, because they want to offer this flexibility and not have the usual admin of people writing to make changes.

But that flexibility would fail the HMRC rules for salary sacrifice. The rules limit the reasons you can change "your" (it's not "your", with sal sac all contributions are employer contributions) contribution - they are limited to things like marriage, house move, child birth, bereavement. If you're doing that regularly you must have a pretty hectic life.

But also, ALL pensions relate to tax.

Salary sacrifice is the only type that also relates to NI.

You must have realised by now that you don't have a salary sacrifice scheme and you don't know what one is!

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!

Yes I do have a salary sacrifice scheme. That’s how my works pension is set up. Clearly states it on my salary slip each month.

I’m not sure what you are trying to achieve by your arguments but you are making yourself look idiotic.

“Salary sacrifice means giving up part of your salary in return for a tax or National Insurance benefit. The benefit can be a pension contribution.”

That’s how a major pension provider describes it. Furthermore, my salary slip each month clearly states that my pension contribution is salary sacrifice.

What ‘pension taxation’? How is it going to reduce pensions?
Someone fortunate to earn enough to be able to sacrifice £10k into a pension, is SAVING nearly £4k in tax ! They are getting ALL that extra tax relief in their pension.
They would pay £160 extra NI for the privilege, that’s all.
I detest this Govt. but this isn’t a bad idea.

No you didn't.

Can you please explain how exactly you will compensate the loss of 325k to me personally to keep me incentivised to work and save?
as it is now, I'm taxed to the hilt, whatever I was planning to pass to my DC attracts 40% IHT (500k would only cover a modest flat in London), I'd have to self fund my old age care and now you take 325k of state pension from me. Unless really very rich, it's a huge impact.

Why would I work then? I'd better stop ASAP, reduce my hours, spend it all/gift to DC so to celebrate my 67th birthday with zilch?

The employers Nic saving was to encourage employers to enter these schemes. My employer splits the benefit.

they reckon they’ll raise £2bn a year. That’s peanuts really. For the amounts they need they need to stop tinkering and adding complexity for relatively small amounts and bite the bullet and raise one of the big 3. A bit of reform to get rid of the cliff edges (which can be done tax neutrally) would be appreciated!

So they save 4k in tax today. They lose access to this money for a number of years. They pay charges to pension funds during this years.

When they start withdrawing pension they pay income tax on it. Most likely at a lower rate, e.g. 20% instead of 40%, but they don't get any state benefits in this case, unlike those on benefits.

Let's don't forget that pensions are invested in businesses - something RR is desperate to get more of.

I think it's not a bad deal for government at all.

The problem is that most people see that someone has more than them and want to take it away/redistribute, instead of taking into account behavioral impact of changes.

No, it isn’t. Employer contributions to defined benefit schemes are also exempt from National Insurance.

The are full articles about it in these newspapers and many others. People aren’t “speculating” just because you haven’t read them.