Salary sacrifice

[takethatlady]

Hi there,

I am 12 weeks pregnant with DC1 and due in June. All being well I will be returning to work in January 2011 and DH and I are starting to think about childcare/finances.

I work at a uni and they offer a salary sacrifice scheme for their (very good) nursery, which I would like to use 3 days a week. As far as I can make out, this will cost £150 a week and is for 45 weeks a year = £6750 p.a.

My wage will be £31.5k that year, so with the salary sacrifice scheme I will pay the childcare costs and take home just below £25k. I have student loans and a pension.

I'm emailing to ask about this because according to this salary calculator thing online this will mean that I take home just over £1500 per month whereas currently I take home just over £1800 a month, meaning that my childcare will actually only cost me £3600 per year.

Can this be right? It seems like a phenomenal saving and will make a MASSIVE difference to our lives - but I'm worried I'm missing something. Do these figures sound about right to other people who are involved in similar schemes?

Sorry to ask such a blunt question but there's no-one who would know about this in RL who I feel comfortable exposing all my finances to.

Thanks for any advice!

You can't usually salary sacrifice your whole childcare costs, only a max of 55 pounds a week. However, your dh's employer may well run a similar scheme so you can take advantage of this twice over (ie sacrifice 110 pounds a week between the two of you)

Salary sacrifice does make a big difference -but are you sure that you will be able to sacrifice £150/week?

The most that I can sacrifice is £243 per month, and I thought that was fairly standard?

I also did the maximum of £243 a month.

IIRC, the limit is the Treasury's. It is possible to draw more than that in vouchers, but beyond whatever is the current limit can be treated as a taxable benefit from your employer and therefore isn't worth the hassle.

PS is this another pruning of support to families? It was £243 for my youngest who is now in yr2.

You can indeed sacrifice the whole amount of the childcare if it's an employer run nursery. I did this when I worked at a University (I don't now - sadly). I makes a HUGE difference and means you aren't limited to the 243 childcare vouchers a month.

See here:
www.admin.ox.ac.uk/eop/child/tax.shtml

It's essentially salary sacrifice, so you sacrifice the whole amount and vary your salary accordingly.

Savings detailed here:

www.admin.ox.ac.uk/eop/child/tax2.shtml

It's £243 each at the moment. But the amount is changing in April I believe to be quite a bit less. So if you can, sign up and keep the money in your vouchers account so you can pay your nursery when the time comes.

Ah sorry didn't read the OP properly! But check if the change is the same for employer nurseries too.

Ken - where did you see that the amount you sacrifice is being reduced?? Also - don't think you can bank money - it'd taken off your salary at source and then transferred to a childcare provider directly. You can't 'bank' the money afaik.

Yes, you can 'bank' the money. Ours is in an account and we then choose which childcare provider receives it.

The changes from April shouldn't affect anyone who is already signed up to the voucher scheme. If you start after April then the amount is going to be reduced to about 140 pounds (iirc) for higher rate tax payers only.

Wow thanks for the quick advice! A bit confused now as I think littlerats is saying I can sacrifice the whole lot and everybody else is talking about a limit. But the limit seems to apply to childcare vouchers - there's no voucher scheme at my employer's.

My DH is a schoolteacher but he's looking for a new job nearer to my uni (we're moving as I currently commute 75 mins each way) so I'm not sure what kind of childcare options there will be at his end.

£55 a week would be £2475 of savings, so not as good - I hope I can definitely sacrifice the whole lot! I guess I'll have to ask HR.

Oh - looking at that Oxford link it actually has someone on my pay grade and paying nearly £8k a year in childcare costs and the entire amount can be sacrificed.

I can't quite believe how generous this is.

you can def sacrifice the whole lot if it's employer run. the reason i linked to oxford is that's where i worked. i'm now at an employer where i can only get vouchers - so only 243 a month, 55 a week.

it seems unlikely they'll make cuts to the employer salary sacrifice. there are few schemes - mainly unis.

it is odd though that more employers don't do this - would help loads in terms of employee retention, i've been trying to convince my current employer to run a nursery (they can outsource to a provider - kidsunlimited etc - provided they provide the premises etc) so there's not insurance/training issues.

takethatlady - my advice - get on the waiting list now, at oxford, it was about 2 years at some points. understandably it's popular!

litterats brilliant thank you so much!

I've got an appointment with the nursery on 20th December and DH and I are both going to visit and get our names down - 2 years! As if anyone can now if they're going to have a baby in two years!

We'll do our best. Thanks so so much for the advice :)

You can bank the money. My DH banked a few months before I went back to work. You transfer it yourself from your vouchers account.

Link on the changes here

Can someone point me to the guidelines which explain how you can bank the money please? I was under the impression that vouchers can only be used to pay an existing liability.

What provider do you use? I can only use them to pay her nursery. But we started saving from when we booked her in. So had a head start in the voucher account when she started.

Actually, what I wrote wasn't clear. I meant bank as in save up in your voucher account and then transfer it into the provider account when you like.

It doesn't have to be an existing liability, no (although I don't know whether you can get them if you're pregnant and don't have a child already). The only stipulations with our account are that we must use them within a year from the date of issue.

just to make it clear in case it's not (and it wasn't to me but i can be quite dim) that this is salary SACRIFICE and so unless you opt out in plenty of time would affect any future maternity, redundancy etc calculations as well as mortgage applications. It worked well for me then i opted out in time - just worth being aware.

OP, you need to check with your employer - University of Oxford is incredibly good with stuff like this, but I have no idea how other's work.

You should be able to email your HR person/payroll and ask for a monthly breakdown of your salary on 3 days a week (inluding childcare sacrifice and pension)

It does make a MASSIVE difference though, definitely worth doing.

"If you start after April then the amount is going to be reduced to about 140 pounds (iirc) for higher rate tax payers only."

Is this true?? I've been worrying about cuts to this, do you have a link?

I think that's disgusting

It's on the link that ken provided. It's only people who haven't already registered with the scheme, if that's any reassurance.

Got it, thanks.

It is some reassurance, and my employer is excellent, so I expect I'll be OK... You'd think this govt want all women to stay home looking after children or something

anyway, sorry to have derailed your thread OP..