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 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 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.
Fantastic video, Justin! I didn't even know you had such a useful TH-cam 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!
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.
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.
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.
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?
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 :)
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
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.
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.
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
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.
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?
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.
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Do you know how salary sacrifice works to boost your pension pot?
I sacrifice 50% of my salary and saving 7k a year into my pension - great video, thanks
Excellent Nick, what level of tax relief are you receiving?
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!
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?
@@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 👍🏼
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?
@@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.
@@Mr.GeeKhan786 I put in 2800 AVC per month, then sacrifice my bonus as well
Thanks Justin. So should your p60 then show the amount after sacrifice as that is essentially your new salary?
@@jonathanwarne3480 yes
Fantastic video, Justin! I didn't even know you had such a useful TH-cam 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!
Great to hear from you George, all the best.
do you know of a calculator I can use please
Sorry I don't.
Great video, will any of this affect your state pension pot?
You just want to make sure you are paying enough NI to get a full year's credit. Or getting credits in other ways.
@TheRetirementCafe OK, so as long as I'm paid over £12500/year after sacrifice I should be fine?
@@f1jr724 yes
@TheRetirementCafe what a Gentleman... many thanks, and keep up with the great work, its really appreciated by us numpties 👏
thank you! Keep paying attention to your state pension forecast. It really is the bedrock of most people's pensions. @@f1jr724
As a higher rate taxpayer should i do salary sacrifice or make personal pension contributions, or do they have the same net impact
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.
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
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.
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 ?
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.
Probably just need to ask your payroll department.
It makes sense however by sacrificing your salary does the money sacrificed go into the pension pot.
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?
The Finance Manager at work doesn't understand salary sacrifice. She just looks at me sideways like one of those German Shepherd dogs!
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 :)
Is the max you can salary you can sacrifice, down to National Minimum Wage?
So does the amount paid by the employer form part of your total allowance for the year?
Yes it does.
@MulberryEllie Hi Ellie, Your eligible pension contributions will be based on your post-salary sacrifice salary.
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
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.
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.
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
Most Employers will continue to pay their 10% and also the NI they are saving by you earning less. Ask them about salary sacrifice.
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
I am employed by Local government, ill they be able to do it all
What’s the point the taxman is going to take it all anyway.
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.
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?
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.
straighten your glasses