Increasing Pension Contributions

[Supersuperleeds]

It saves you income tax too……….same as salary sacrifice on the c2w scheme

Salary sacrifice doesn't give you any additional income tax savings on pensions, it does on C2W

 

[jowwy]

Salary sacrifice doesn't give you any additional income tax savings on pensions, it does on C2W

Do I pay less tax with salary sacrifice?
Under the following salary sacrifice schemes, the salary you forgo will not be subject to tax or National Insurance contributions:

employer-provided childcare
cycles
ultra-low emission vehicles, including company cars
pensions
retraining courses and
outplacement services intangibles e.g. buying additional annual leave

Read more: https://www.which.co.uk/money/tax/income-tax/tax-codes-and-paye/salary-sacrifice-a1k0c7s8qqlp - Which?

 

[Supersuperleeds]

Do I pay less tax with salary sacrifice?
Under the following salary sacrifice schemes, the salary you forgo will not be subject to tax or National Insurance contributions:

employer-provided childcare
cycles
ultra-low emission vehicles, including company cars
pensions
retraining courses and
outplacement services intangibles e.g. buying additional annual leave

Read more: https://www.which.co.uk/money/tax/income-tax/tax-codes-and-paye/salary-sacrifice-a1k0c7s8qqlp - Which?

I'm probably not explaining it very well. Pensions save you tax regardless of how you pay into them, whether that be through contributions from your salary, salary sacrifice or chucking in a lump sum from savings. All methods give you the same tax relief.

Salary sacrifice gives you the additional saving on NI contributions but you cannot save more tax by using one for pensions

 

[jowwy]

I'm probably not explaining it very well. Pensions save you tax regardless of how you pay into them, whether that be through contributions from your salary, salary sacrifice or chucking in a lump sum from savings. All methods give you the same tax relief.

Salary sacrifice gives you the additional saving on NI contributions but you cannot save more tax by using one for pensions

But the more you sacrifice, the less tax and NI you pay………

 

[Low Gear Guy]

My understanding was that salary sacrifice affected company pension contributions which are based on gross salary. A lower salary will result in less tax and NI but also a reduced employer pension contribution.

 

[midlife]

And less tax relief you can claim iirc, but I'm always a bit hazy on claiming tax from pension contributions..

 

[Supersuperleeds]

But the more you sacrifice, the less tax and NI you pay………

Yes, but if you paid in more to your pension using any other method you'd save the same amount of income tax. A salary sacrifice scheme for pensions isn't designed to save income tax, just NI.

 

[Supersuperleeds]

My understanding was that salary sacrifice affected company pension contributions which are based on gross salary. A lower salary will result in less tax and NI but also a reduced employer pension contribution.

No, your employer puts into your pension pot the salary you sacrificed plus whatever normal contribution they put in.

Your pension pot gets the same contributions into it and the same tax reliefs regardless of the method used. All salary sacrifice does (in the case of pensions) is save the employer and employee NI

 

[jowwy]

Yes, but if you paid in more to your pension using any other method you'd save the same amount of income tax. A salary sacrifice scheme for pensions isn't designed to save income tax, just NI.

Correct…..but as im currently paying 5% and im increasing it to 7%……will i pay the taxman less in tax and NI…….simple answer is YES

therefore by putting more money in my pension pot, less will go to the taxman, therefore offsetting some of the additional rise in NI……

so if you read my OP, i said i was looking to increase my pension contributions, to save more on NI to help reduce the amount of the NI rise….

 

[Supersuperleeds]

Correct…..but as im currently paying 5% and im increasing it to 7%……will i pay the taxman less in tax and NI…….simple answer is YES

therefore by putting more money in my pension pot, less will go to the taxman, therefore offsetting some of the additional rise in NI……

Yes, but you originally said;

"As my company pension scheme is based on Salary Sacrifice. "

All I am saying is the salary sacrifice element is irrelevant for income tax purposes when it comes to pensions.

 

[jowwy]

Yes, but you originally said;

"As my company pension scheme is based on Salary Sacrifice. "

All I am saying is the salary sacrifice element is irrelevant for income tax purposes when it comes to pensions.

But i didnt say tax in my original OP, i said to reduce NI contribution

 

[glasgowcyclist]

So it is gross and takes away any shennigans.

It is gross but a Smart (salary sacrifice) pension contribution means your gross pay is reduced.

Let’s say your normal salary is £30,000 and you want to contribute £5,000 to your pension. The employer agrees to pay this for you but your gross salary is reduced by the same amount. Your gross salary is now £25,000 and both your and your employer’s NI contributions are thereby reduced.

 

[midlife]

Correct…..but as im currently paying 5% and im increasing it to 7%……will i pay the taxman less in tax and NI…….simple answer is YES

therefore by putting more money in my pension pot, less will go to the taxman, therefore offsetting some of the additional rise in NI……

so if you read my OP, i said i was looking to increase my pension contributions, to save more on NI to help reduce the amount of the NI rise….

I'm sure you don't pay income tax on pension contributions. If the salary sacrifice was actual salary you wouldn't pay income tax on it if you stuck it in your pension pot. No tax saved as no tax to pay. Or am I confused

 

[jowwy]

I'm sure you don't pay income tax on pension contributions. If the salary sacrifice was actual salary you wouldn't pay income tax on it if you stuck it in your pension pot. No tax saved as no tax to pay. Or am I confused

You pay less NI on the salary sacrifice……not less tax, my OP stated NI, i said nothing about tax in isolation

if i pay 5% pension, the i would save tax and NI….on that 5%, if it was an ordinary pension i would only save the tax…

so if i up the contribution to 7%, i pay less tax and NI on that 7%………therefore more money going into my pension and less going on the new NI tax levy for the taxman

 

[Deleted User]

Totally confused now, my company uses salary sacrifice as well.
Apart from the extra going into my pension pot what advantage reference NI is there, surely when it goes up I'll still be paying the extra? Or is it that because I now have less to be taxed on the increase will be less?