How To Boost Your Pension Pot With Salary Sacrifice

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Salary sacrifice means you stop making pension contributions personally and get your employer to make them all for you. Salary sacrifice pension is the best tax-saving opportunity available to most regular employees on a salary.
That’s because the national insurance saved on your pension contributions are added to your pension pot, along with the income tax relief you already receive. With the recent increase in national insurance rates from 6th April 2022, salary sacrifice has become even more attractive.
Here’s all you need to know about which schemes are eligible and how salary sacrifice schemes work.
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Опубликовано:

4 окт 2024

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Комментарии : 55

@TheRetirementCafe 2 года назад

Do you know how salary sacrifice works to boost your pension pot?

@VioletJessica- 2 месяца назад

I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.

@FernandoBowen-78 2 месяца назад

I feel your pain mate, as a fellow retiree, I’d suggest you look into passive index fund investing and learn some more. For me, I had my share of ups and downs when I first started looking for a consistent passive income so I hired an expert advisor for aid, and following her advice, I poured $30k in value stocks and digital assets, Up to 200k so far and pretty sure I'm ready for whatever comes.

@VioletJessica- 2 месяца назад

@@FernandoBowen-78 That's actually quite impressive, I could use some Info on your FA, I am looking to make a change on my finances this year as well

@FernandoBowen-78 2 месяца назад

@@VioletJessica- My advisor is Victoria Carmen Santaella

@FernandoBowen-78 2 месяца назад

You can look her up online

@EleanorMabel 2 месяца назад

@@FernandoBowen-78 The crazy part is that those advisors are probably outperforming the market and raising good returns but some are charging fees over fees that drain your portfolio. Is this the case with yours too?

@nicobass1966 2 года назад

I sacrifice 50% of my salary and saving 7k a year into my pension - great video, thanks

@TheRetirementCafe 2 года назад

Excellent Nick, what level of tax relief are you receiving?

@George.Pandeliev 9 месяцев назад

Fantastic video, Justin! I didn't even know you had such a useful RU-vid channel. We've met 5-6 years ago when I did reception service for a venue of your choice! You're such an inspirational person, kudos! All the best I 2024!

@TheRetirementCafe 9 месяцев назад

Great to hear from you George, all the best.

@DrJohnners 6 месяцев назад

Not to mention Additional Voluntary Contributions, especially if you're in the 40% or 45% bracket. I pay 5%, my company 10%, and I'll be maxing out my 60k allowance for the next ~8 years before retirement, all thanks to Salary Sacrifice and ~50k of AVCs. It also brings me out of the 40% bracket so any payrises are subject to 20% tax. Double win!

@Mr.GeeKhan786 4 месяца назад

Interesting. Hadn''t considered also doing an AVC in addition to salary sacrifice. Is the AVC normally done near the end of the tax year?

@DrJohnners 4 месяца назад

@@Mr.GeeKhan786 Each month. I choose to pay an extra ~2.8k of AVCs out of every pay packet pre-tax, the end of year bonus and the other normal pension contributions make it up to 60k 👍🏼

@TaiwoOmotosho-m9v 4 месяца назад

Why not SIPP?How much do you have to pay per month for 12 months to max the £60K allowance and are you on autoenrollment default strategy?

@DrJohnners 4 месяца назад

@@TaiwoOmotosho-m9v 2800 AVC, 5% personal 350, 10% employer 700. That's about 3800 per month, 16k bonus sacrifice takes it up to the 60k. I could open a SIPP and do a partial transfer but the funds available on my employer L&G portal are OK. I transferred from the rubbish default fund they put me in.

@DrJohnners 4 месяца назад

@@Mr.GeeKhan786 I put in 2800 AVC per month, then sacrifice my bonus as well

@EddieBOY73 Год назад

Hi this is a very informative video. My question is, can Salary Sacrifice Arrangement lead to Gaps in National Insurance contributions? Secondly, can salary sacrifice arrangement lead to less state pension? Just wondering.

@someoneiselse 4 месяца назад

As a higher rate taxpayer should i do salary sacrifice or make personal pension contributions, or do they have the same net impact

@Poetrap1 Год назад

Good video but doesn't take into account the lower threshold for pension contributions of either £120 per week or £6240 per year. Wouldn't the pension contributions be reduced?

@Siccardroneservices Год назад

It makes sense however by sacrificing your salary does the money sacrificed go into the pension pot.

@tbmacho 5 месяцев назад

Hi this sounds really good but ,so with this arrangement I’d stay on same monthly pay and would not affect any benefits that I get ,correct ?

@DoubleWaterFire 9 месяцев назад

Dose this only work off your set salary/normal working hours? I'm paid hourly by my employer full time Monday-Friday and I have the opportunity to earn a lot more money working overtime. The thing is, with my normal working hours I don't earn enough to contribute to my SIPP as I'm already maxing out my SSI each month and the only way I can earn enough to add to my SIPP is to work overtime, the extra money I earn from Overtime can vary... Great video btw thanks :)

@roophayre3995 8 месяцев назад

great video . never under stood before,but had been sacrificing 10%. how do i know if my company has added the national contributions to my pension as video says they may agree to add to my pension pot.

@TheRetirementCafe 8 месяцев назад

Probably just need to ask your payroll department.

@davidthompson8757 Год назад

Justin great video. Any chance you could expand on this illustrate contractors operating through umbrella companies insider IR35. My understanding is I may also benefit from the reduced employers national insurance deductions which would result in extra income for me as my contract is based on a day rate before taxes.

@AmandaFieldTAUK Месяц назад

do you know of a calculator I can use please

@TheRetirementCafe Месяц назад

Sorry I don't.

@ITRIEDA1000NAMES 11 месяцев назад

hi Justin great video can any company and pension do this ? and can you yourself decide on how much to sacrifice, thanks in advance Dave

@TheRetirementCafe 11 месяцев назад

Generally yes though Minimum wage rules apply and other contractual requirements could be an issue. I would always seek advice from your accountant or tax adviser. Not all employers will facilitate salary sacrifice.

@Yesthatisme14 Год назад

Informative video. Just a question with the illustration. The tax relief from the government is just 20%, hence the employee's £800 pension contribution should total to £960 and not £1000, which is shown in your video. Am I missing something?please correct me if I'm wrong

@Heliossoileh 7 месяцев назад

If you had £1000 and were taxed at 20%, you'd be left with £800. So, if you receive tax relief at 20% on the £800, you receive £200, to 'reverse' the tax. 20% tax relief on a sum of money amounts to a 25% increase to that sum.

@phamalam Год назад

Is the max you can salary you can sacrifice, down to National Minimum Wage?

@lukebrown8580 Год назад

Hi, I earn 80,000k a year. Can you please tell me if salary sacrifice at 5% pension is a good idea for me? My company is option me the option

@f1jr724 7 месяцев назад

Great video, will any of this affect your state pension pot?

@TheRetirementCafe 7 месяцев назад

You just want to make sure you are paying enough NI to get a full year's credit. Or getting credits in other ways.

@f1jr724 7 месяцев назад

@TheRetirementCafe OK, so as long as I'm paid over £12500/year after sacrifice I should be fine?

@TheRetirementCafe 7 месяцев назад

@@f1jr724 yes

@f1jr724 7 месяцев назад

@TheRetirementCafe what a Gentleman... many thanks, and keep up with the great work, its really appreciated by us numpties 👏

@TheRetirementCafe 7 месяцев назад

thank you! Keep paying attention to your state pension forecast. It really is the bedrock of most people's pensions. @@f1jr724

@LatinoAaron Год назад

The Finance Manager at work doesn't understand salary sacrifice. She just looks at me sideways like one of those German Shepherd dogs!

@dread4836 Год назад

I am employed by Local government, ill they be able to do it all

@ajsvet3073 2 года назад

So does the amount paid by the employer form part of your total allowance for the year?

@TheRetirementCafe 2 года назад

Yes it does.

@TheRetirementCafe 2 года назад

@MulberryEllie Hi Ellie, Your eligible pension contributions will be based on your post-salary sacrifice salary.

@hetoge Год назад

So I work and currently pay 15% my employer pays 10% if I switch to salary sacrifice would that meen my employer would no longer pay there 10% you say they might pay in the bit that they save could I not carry on with my current pay men and do the sacrifice as well on top

@TheRetirementCafe Год назад

Most Employers will continue to pay their 10% and also the NI they are saving by you earning less. Ask them about salary sacrifice.

@forest_169 5 месяцев назад

What’s the point the taxman is going to take it all anyway.

@TheRetirementCafe 5 месяцев назад

Not sure I understand your comment. When does the taxman take 100% of your pension? Pension receive very generous tax relief and are taxed on the way out at a lower rate than when you are earning.

@bayingjase2006 8 месяцев назад

You say employer contributions doesn’t matter in your example, BUT IT DOES. If the employer has to contribute 7% of £30,000, it's a lot more than if I've sacrified myself to say £25,000 right? You ARE losing significant employer contributions and this fact should've been figured into your example so people can see the real numbers. The supposed savings to you isn't as much, but the savings to emoloyers between contributions and NI is HUGE! So who really benefits from these schemes?

@TheRetirementCafe 8 месяцев назад

Thanks for your comment. Most employers will continue to contribute the pre-salary sacrifice amount. Of course, check this before salary sacrificing otherwise a contribution from your net salary may be better.