Salary Sacrifice for pension?

[Nonownon]

Been offered this at work, wondering what to do.

I am hopeless with finances. Currently on the workplace pension scheme, employer pays a % in too. Need to decide if I want to join this SS scheme, employer would be paying a little more into it. Been reading about random stuff online, DC pensions and maybe DB and don't have a clue what it means. But mostly I want to know if I'd be in a good position doing this, or not.

I'm just really confused. I'm not on a massive salary. I have a few hundred left over each month but try to be careful with spending, after things like mortgage and other bills. But the way this looks and was explained to me by payroll I'd actually be making a little bit more net pay each month because of tax and NI contributions being less or something? But you're getting paid less gross pay? I'm going round in circles with this, I was on the verge of signing up for it then decided to read up a bit more and try to get my head round it all. I just don't want to end up in a bad place because I've made a bad decision but from everything I've read online it's supposed to be a good idea to do this? Read that it might affect mortgage affordability but maybe not as the lender might not count it? Anyone help? Thanks

Pension sacrifice is taken from your gross pay...i.e before tax and NI are deducted. If you contribute to your pension from your gross pay you NI and tax contributions would be less. If you want a private pension pot when you retire I would say contribute if you can afford too.

Salary sacrifice is the most tax efficient way of saving into a pension and is also the most straightforward as you never have to claim back any tax.

Your employer will take your contributions from your gross pay meaning you not only pay no tax on the amounts saved but also no NI either.

The mortgage issue you mention is pretty much irrelevant. While the pension contributions never show up in your take home pay, were you to pay contributions in another way such as into a separate private pension from net pay and then claim the tax back, your total disposable income would actually be less meaning less mortgage borrowing would be approved.

In summary salary sacrifice is by far the best pension saving option there is and if your employer offers it I can see no reason why anyone would not take part in the scheme if they can afford to.

Generally these schemes are worthwhile, because you're saving NI as well as tax, plus your employer is adding to it.

They are especially useful if your salary is near the threshold for the next income tax band, as the reduction in gross pay means you don't cross it. The employer gains too, as they owe less employers' NI.

You don't say how old you are, and whether you might have other spending commitments in the future, which may impact whether or not it's right for you. If you don't have any other pension savings outside of your main work pension, I'd be inclined to go for it. Presumably you could stop contributions if you suddenly needed the money?

Salary sacrifice for pensions is extremely common and mortgage companies are very familiar with it. I don’t believe it will affect mortgage calculations these days. Generally it is the most tax efficient way to arrange pensions as both you and your employer save national insurance, and employers generally contribute a little more to reflect that, as yours has done.

the main thing to check is that the terms of the scheme remain the same. Is your current scheme also a DC pension? Is the retirement age the same? Do you get the same choice of investments?

Yes it is a good idea. To help make it clearer, watch the Martin Lewis Special that was screened on ITV on Tuesday 28th about pensions.

As you say you are not on a big salary it is worth noting that you are not allowed to salary sacrifice to below minimum wage.

Do it. I did well for it.

I agree that generally it's a good thing to do if you can afford it. You won't be able to access the money until you're over a certain age, that will be set by your scheme. You can stop the ongoing contributions at any time.

If you're in a union, they will likely have some free pension advice that you can access, which might help

I got about £25 extra in my wages a month once worked moved over to salary sacrifice. If you earn above the threshold hold for paying NI it’s worth doing.
rather than seeing 2 contributions into your pension pot a month you will see 1 from your employer.

If you share your age, annual salary, the % contribution you would make and your employer would make, we can give you some rough estimations.

Thanks everyone for all the good advice have now signed up for it.