# Increasing Pension Contributions



## jowwy (9 Sep 2021)

As my company pension scheme is based on Salary Sacrifice. I'm going to up my contributions to negate the increase in NI in 2022......more going into my pot and less into theirs

anyone else thinking of doing it??


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## fossyant (9 Sep 2021)

CTW scheme, although I don't need another bike. Our pension isn't Salary Sacrifice though - we can only do AVC's

Yes the new NI scheme is crap. 1% on 40% taxpayers would work better, but Boris' chums wouldn't like it.


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## Electric_Andy (9 Sep 2021)

jowwy said:


> As my company pension scheme is based on Salary Sacrifice. I'm going to up my contributions to negate the increase in NI in 2022......more going into my pot and less into theirs
> 
> anyone else thinking of doing it??


If you don't mind me asking, what % were you paying in, and what have you upped it to? I currently put in 9.3% but that's NHS. I wonder if I put in more, would my employer up there's too or would it just be me paying in more?


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## fossyant (9 Sep 2021)

Electric_Andy said:


> If you don't mind me asking, what % were you paying in, and what have you upped it to? I currently put in 9.3% but that's NHS. I wonder if I put in more, would my employer up there's too or would it just be me paying in more?



Your employer won't put more in - the amount's defined by the 'actuary' for those schemes.


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## DCLane (9 Sep 2021)

AVC's in education aren't really worth it and the teacher's scheme doesn't allow top-ups. I'll just pay the extra tax 

No extra bikes needed at the moment so no CTW either.


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## jowwy (9 Sep 2021)

fossyant said:


> CTW scheme, although I don't need another bike. Our pension isn't Salary Sacrifice though - we can only do AVC's
> 
> Yes the new NI scheme is crap. 1% on 40% taxpayers would work better, but Boris' chums wouldn't like it.


im putting in 5% - company puts in 9%(Max amount)....but i can put in as much as i require and the companies max would be 9%


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## glasgowcyclist (9 Sep 2021)

I've already been putting in the maximum to my pension, I can't put in any more as it'll take me below the national minimum wage.


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## fossyant (9 Sep 2021)

jowwy said:


> im putting in 5% - company puts in 9%(Max amount)....but i can put in as much as i require and the companies max would be 9%



Only 5%, you need nearer 10%. I put in around 10% and my employer 22%


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## jowwy (9 Sep 2021)

fossyant said:


> Only 5%, you need nearer 10%. I put in around 10% and my employer 22%


i put in what i can afford..........at the mo its 5%, but looking to put in 7% in april. My partner is retired due to ill health, so only 1 adult wage coming into our house and a very small pension contribution from my Mrs


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## Milkfloat (9 Sep 2021)

fossyant said:


> Only 5%, you need nearer 10%. I put in around 10% and my employer 22%


Very generous, public sector or ex-public sector?


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## Tenacious Sloth (9 Sep 2021)

Milkfloat said:


> Very generous, public sector or ex-public sector?



Neither. He’s only paid £10 a week. 😂


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## potsy (9 Sep 2021)

I put in the max for our scheme 6% with my employer putting in 9%.
Can put in AVCs but haven't looked into that properly, or know if it's worthwhile.


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## si_c (9 Sep 2021)

I'm putting in 9.3% for my NHS pension scheme although that is likely to rise in the near future. Currently the NHS contributes just under 15% but that was supposed to rise to 20% in April 2021, however that was deferred because of COVID.

Maximising your pension contributions now, regardless of motivation, is the best course of action anyone can take for their future, especially given that a general savings account is pointless currently.


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## ebikeerwidnes (9 Sep 2021)

Slightly different but I have paid into a pension most of my life (a couple of breaks when I was unemployed or training)
And also been paying Nat Insurance all that time

I checked my NI records and I was over 40 years so the letter said I was fully payed up
so I left it

I went to an IFA a few weeks ago and they insisted on re-checking

turns out that, although I have over 40 years of NI contributions I will not currently be entitled to a full state pension - as my scheme was 'contracted out' I need to pay several thousand to get the contribution back up.
I also need to keep paying for the next 5 years in spite of being retired

Posting this to advise people to check it all out carefully - especially if you have been in a big pension scheme including the NHS, Teacher Pension, local government etc etc.
Probably only applies to the old final salary type - but worth checking when you start thinking about retiring - which should be a good 10 years before you do!


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## DCLane (9 Sep 2021)

Milkfloat said:


> Very generous, public sector or ex-public sector?



Teacher's pension like mine - I'm putting in 11.3% and the employer 24%. The more you earn, the bigger percentage contribution from both sides. We can do a faster accrual, but it only applies to career average pensions. Depending upon age that may not apply as it all changed in 2016, then 2021.

The AVC contribution only has member payments going in, together with a hefty management charge, so after a few years I decided it wasn't worth doing any more.


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## shep (9 Sep 2021)

I pay 10% and company pays 10%.


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## shep (9 Sep 2021)

Electric_Andy said:


> If you don't mind me asking, what % were you paying in, and what have you upped it to? I currently put in 9.3% but that's NHS. I wonder if I put in more, would my employer up there's too or would it just be me paying in more?


They usually match you up to a certain point, 10% in my case so that's what I do.

You can obviously put far more in.


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## shep (9 Sep 2021)

glasgowcyclist said:


> I've already been putting in the maximum to my pension, I can't put in any more as it'll take me below the national minimum wage.


A lad at work had a share save scheme mature some yrs ago giving him 20k so he decided to contribute his entire monthly salary into his pension for 12 mths and live off his windfall.

He lived off extra's like callout, overtime etc so still picked something up each month.

The following tax year it was deemed he earned below national wage and he got 6k from the state!

Needless to say the rules changed not long after.


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## Cirrus (9 Sep 2021)

Towards the end of my career in a large corporate was putting _significant_ amounts into AVCs, and when I negotiated a leaving package a large chunk of that went into the AVCs as well, which served me well as though it didn't increase the monthly pension amount it did meant I could take it out as a tax free lump sum.


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## jowwy (9 Sep 2021)

So no one is increasing their contribution to their pension then - to offset the rise in NI........


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## midlife (9 Sep 2021)

Nope. I think I give 15% of my income towards my pension and not sure I can change it.


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## fossyant (9 Sep 2021)

jowwy said:


> So no one is increasing their contribution to their pension then - to offset the rise in NI........



Many of us can't, but I'd advise putting in as much as you can afford. It's not going to make a huge difference to the extra NI you pay.


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## jowwy (9 Sep 2021)

fossyant said:


> Many of us can't, but I'd advise putting in as much as you can afford. It's not going to make a huge difference to the extra NI you pay.


it will....cause NI and tax is taken out after my Pension contribution, therefore less salary to tax....which means less tax paid and NI paid

thats the benefit of a salary sacrifice scheme


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## yello (9 Sep 2021)

Yep, agreed, check your state pension records. 

My wife's pension went from being paid up to 2 years shy, no idea why, just 'rule changes' they said. It wasn't a problem to buy a couple of years though (we've been In France for the last 14 years BTW) - the second year only cost something like £2.40 or suchlike. 

Pensions are one of those things that I really don't understand (finance generally tbh) and my eyes glaze over whenever a pensions expert starts talking.


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## shep (9 Sep 2021)

midlife said:


> Nope. I think I give 15% of my income towards my pension and not sure I can change it.


I would be surprised you can't change it, unless your company has set a 15% limit.


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## oldwheels (9 Sep 2021)

My pensions are a bit complicated as I went from employed to self employed and had largely to sort out my own. My wife had a similar problem so we had separate pensions but some proviso that if one died early then a proportion of their pension would still be paid to the survivor. It was more expensive but worth it I think. 
HMRC do not help by making one of my pensions taxable but then have to refund the tax at the end of the financial year. I have spent what probably amounts to days on the phone trying to sort this out but it never works tho they assure me it will be sorted but never is.
I have enough for my needs tho' not necessarily for all my wants. For example I may want to sell up and move to the mainland but that would be a financial problem I could not solve partly due to my age and also difference in house values. I would be just possible I think but clear me out financially which would not be a comfortable position to be in.


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## Electric_Andy (9 Sep 2021)

fossyant said:


> Many of us can't, but I'd advise putting in as much as you can afford. It's not going to make a huge difference to the extra NI you pay.


So for example, if I opt to pay in an extra £60/month into my pension, instead of that going into my 0.00001% interest savings account, would it work out better in the long run? I'm hoping to take my NHS pension in 15 years when I'm 55


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## shep (9 Sep 2021)

jowwy said:


> So no one is increasing their contribution to their pension then - to offset the rise in NI........


I think you've got that wrong, I'm pretty sure NI is calculated on you're Gross earnings so paid on your contributions.
I know it's Tax efficient.
Feel free to check and let us know.


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## midlife (9 Sep 2021)

shep said:


> I would be surprised you can't change it, unless your company has set a 15% limit.



NHS pension, can buy add ones but as I have been paying since 1982 I think I can get in my 40 years


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## Tom... (9 Sep 2021)

jowwy said:


> it will....cause NI and tax is taken out after my Pension contribution, therefore less salary to tax....which means less tax paid and NI paid
> 
> thats the benefit of a salary sacrifice scheme



That's how the majority of pensions work, and not quite what salary sacrifice is.


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## winjim (9 Sep 2021)

shep said:


> I think you've got that wrong, I'm pretty sure NI is calculated on you're Gross earnings so paid on your contributions.
> I know it's Tax efficient.
> Feel free to check and let us know.


Ha. I think you're right. I take back my earlier comment, of course it's calculated on gross earnings, anything else would be daft.


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## Arrowfoot (9 Sep 2021)

NI has always been on gross pay.


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## fossyant (9 Sep 2021)

Arrowfoot said:


> NI has always been on gross pay.



It is. Pension, on the other hand influences your 'taxable pay'.


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## Electric_Andy (9 Sep 2021)

I understood it as Jowwy did i.e. the pension comes out at source so if you pay more into it, your monthly gross amount will drop hence you'll pay less tax and NI. I'm sure Martin Lewis can clarify


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## Arrowfoot (9 Sep 2021)

Electric_Andy said:


> I understood it as Jowwy did i.e. the pension comes out at source so if you pay more into it, your monthly gross amount will drop hence you'll pay less tax and NI. I'm sure Martin Lewis can clarify


NI must be deducted by the employer before taxes and pension from day 1.

Edit : This is incorrect, its minus salary sacrifices but includes all allowances.


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## glasgowcyclist (9 Sep 2021)

It is different if you are using a Smart pension contribution. This method reduces the NI payments for both the employer and employee.


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## jowwy (9 Sep 2021)

Arrowfoot said:


> NI must be deducted by the employer before taxes and pension from day 1.


Its salary sacrifice…therefore reducing my gross pay, therefore paying less tax and NI………


Do you pay NI on pension contributions salary sacrifice?

The amount you sacrifice on *your salary isn't subject to income tax or NI contributions*. This saves you a bit extra, since standard pension tax relief only repays income tax and doesn't include NI.


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## midlife (9 Sep 2021)

Reducing your annual salary via salary sacrifice isn't for everyone, reduces your chances of getting a mortgage and other things.


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## jowwy (9 Sep 2021)

midlife said:


> Reducing your annual salary via salary sacrifice isn't for everyone, reduces your chances of getting a mortgage and other things.


not if you all ready got one and youve received a 10k+ payrise in the past 12mths………..


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## Arrowfoot (9 Sep 2021)

jowwy said:


> Its salary sacrifice…therefore reducing my gross pay, therefore paying less tax and NI………
> 
> 
> Do you pay NI on pension contributions salary sacrifice?
> ...


Its one of the more misunderstood part of how salaries are treated. Google it.

If you do salary sacrifice, simple calculation of your latest payslip will tell you if it is gross or minus salary sacrifice.

I suspect it was designed from day 1 to prevent employers using "structuring" to reduce their share. Lower salary but higher allowances etc. So it is gross and takes away any shennigans.

Edit: NI does not include include salary sacrifice. Got t wrong earlier.


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## Supersuperleeds (9 Sep 2021)

jowwy said:


> So no one is increasing their contribution to their pension then - to offset the rise in NI........



I'm thinking of doing it, though I was thinking of chucking more in before the NI rise.


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## Supersuperleeds (9 Sep 2021)

shep said:


> I think you've got that wrong, I'm pretty sure NI is calculated on you're Gross earnings so paid on your contributions.
> I know it's Tax efficient.
> Feel free to check and let us know.



Salary sacrifice means you give up some of your salary and your employer puts more into your pension pot. You and the employer both save NI on the sacrificed amount. There is no income tax saving.


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## Supersuperleeds (9 Sep 2021)

Arrowfoot said:


> Its one of the more misunderstood part of how salaries are treated. Google it.
> 
> If you do salary sacrifice, simple calculation of your latest payslip will tell you if it is gross or minus salary sacrifice.
> 
> I suspect it was designed from day 1 to prevent employers using "structuring" to reduce their share. Lower salary but higher allowances etc. So it is gross and takes away any shennigans.



@jowwy is correct, you save NI on the sacrificed amount.


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## jowwy (9 Sep 2021)

Arrowfoot said:


> Its one of the more misunderstood part of how salaries are treated. Google it.
> 
> If you do salary sacrifice, simple calculation of your latest payslip will tell you if it is gross or minus salary sacrifice.
> 
> I suspect it was designed from day 1 to prevent employers using "structuring" to reduce their share. Lower salary but higher allowances etc. So it is gross and takes away any shennigans.


Its minus the salary sacrifice…..i been paying into it for 17yrs, so i know what im paying

i even put a google quoye above in my last post….


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## jowwy (9 Sep 2021)

Supersuperleeds said:


> Salary sacrifice means you give up some of your salary and your employer puts more into your pension pot. You and the employer both save NI on the sacrificed amount. There is no income tax saving.


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


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## Supersuperleeds (9 Sep 2021)

jowwy said:


> 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


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## jowwy (9 Sep 2021)

Supersuperleeds said:


> 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?


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## Supersuperleeds (9 Sep 2021)

jowwy said:


> 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
> ...



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


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## jowwy (9 Sep 2021)

Supersuperleeds said:


> 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………


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## Low Gear Guy (9 Sep 2021)

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.


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## midlife (9 Sep 2021)

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


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## Supersuperleeds (9 Sep 2021)

jowwy said:


> 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.


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## Supersuperleeds (9 Sep 2021)

Low Gear Guy said:


> 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


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## jowwy (9 Sep 2021)

Supersuperleeds said:


> 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….


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## Supersuperleeds (9 Sep 2021)

jowwy said:


> 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.


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## jowwy (9 Sep 2021)

Supersuperleeds said:


> 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


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## glasgowcyclist (9 Sep 2021)

Arrowfoot said:


> 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.


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## midlife (9 Sep 2021)

jowwy said:


> 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


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## jowwy (9 Sep 2021)

midlife said:


> 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


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## shep (9 Sep 2021)

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?


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## Supersuperleeds (9 Sep 2021)

shep said:


> 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?


Employee NI is only paid on salary, with the salary sacrifice you reduce your salary so pay less NI. The more you sacrifice the more NI you will save.

If you increase your pension contributions, your take home pay will go down.


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## Jenkins (9 Sep 2021)

I'm looking to reduce my pension contributions to zero and also pay less tax next April - by taking early retirement.


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## shep (9 Sep 2021)

Supersuperleeds said:


> Employee NI is only paid on salary, with the salary sacrifice you reduce your salary so pay less NI. The more you sacrifice the more NI you will save.
> 
> If you increase your pension contributions, your take home pay will go down.


I understand that bit but I thought NI was worked out on gross pay, is it salary sacrifice that makes it on net then?


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## Supersuperleeds (9 Sep 2021)

shep said:


> I understand that bit but I thought NI was worked out on gross pay, is it salary sacrifice that makes it on net then?


Salary sacrifice reduces your gross pay, you in effect take a reduced salary in exchange for your employer paying more into your pension.


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## shep (9 Sep 2021)

Supersuperleeds said:


> Salary sacrifice reduces your gross pay, you in effect take a reduced salary in exchange for your employer paying more into your pension.


Cheers.


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## Saluki (10 Sep 2021)

I am quite astonished at how much people can put in, and how much their employer contributes too.
If I put in 7.5% of my salary, the company will match it. If I put in 10% the company will only put in 5%. I double checked this with payroll and they confirmed it so I have a separate pension pot and put into that instead.
very late to this pension thing as i didn’t start a pension pot when younger as I was very low waged and needed to do frivolous things like pay the rent and eat. Being a carer for 14 years didn’t help much either.

I will have a chat to my tame accountant, who is all over these things, and see what he advises.


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## Arrowfoot (10 Sep 2021)

glasgowcyclist said:


> 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.





jowwy said:


> Its salary sacrifice…therefore reducing my gross pay, therefore paying less tax and NI………
> 
> 
> Do you pay NI on pension contributions salary sacrifice?
> ...





Supersuperleeds said:


> @jowwy is correct, you save NI on the sacrificed amount.


Apologies. Yes, salary sacrifice is not part of the gross.


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## shep (10 Sep 2021)

Saluki said:


> I am quite astonished at how much people can put in, and how much their employer contributes too.
> If I put in 7.5% of my salary, the company will match it. If I put in 10% the company will only put in 5%. I double checked this with payroll and they confirmed it so I have a separate pension pot and put into that instead.
> very late to this pension thing as i didn’t start a pension pot when younger as I was very low waged and needed to do frivolous things like pay the rent and eat. Being a carer for 14 years didn’t help much either.
> 
> I will have a chat to my tame accountant, who is all over these things, and see what he advises.


It's unusual for a company to reduce the amount they put in when you increase yours?

A bit naughty that.


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## johnblack (14 Sep 2021)

I’m currently putting in 10% and the company put in their max of 9%. I also put in my annual bonus which saves an amazing amount of tax. I’m going to up mine by another 5%pm as the returns are far better than any savings account and it’s far more tax efficient.


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## Lozz360 (29 Sep 2021)

Saluki said:


> I am quite astonished at how much people can put in, and how much their employer contributes too.
> If I put in 7.5% of my salary, the company will match it. If I put in 10% the company will only put in 5%. I double checked this with payroll and they confirmed it so I have a separate pension pot and put into that instead.
> very late to this pension thing as i didn’t start a pension pot when younger as I was very low waged and needed to do frivolous things like pay the rent and eat. Being a carer for 14 years didn’t help much either.
> 
> I will have a chat to my tame accountant, who is all over these things, and see what he advises.


So what you are saying is, the more pension you pay, the less your employer pays? You pay 7.5% employer matches it, result is 15% contribution. You increase your payment to 10%, employer reduces theirs to 5%, result is still only 15%. That doesn’t sound correct or even legal. Your employer is effectively pocketing your additional 2.5% payment!


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## Lozz360 (29 Sep 2021)

johnblack said:


> I’m currently putting in 10% and the company put in their max of 9%. I also put in my annual bonus which saves an amazing amount of tax. I’m going to up mine by another 5%pm as the returns are far better than any savings account and it’s far more tax efficient.


Absolutely. Pensions are a very tax efficient way of saving. Nobody has mentioned in this thread yet that your pension contribution gets 25% added to it by the government (this is in addition to the tax and NI reduction on any salary sacrifice scheme plus any employer contribution increase). Then, assuming you are paying into a defined contribution pension, you can withdraw 25% of it, tax free!


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## Lozz360 (29 Sep 2021)

ebikeerwidnes said:


> turns out that, although I have over 40 years of NI contributions I will not currently be entitled to a full state pension - as my scheme was 'contracted out' I need to pay several thousand to get the contribution back up.
> I also need to keep paying for the next 5 years in spite of being retired


It is not unusual to be contracted out of some your state pension. The chances are, that you will be getting a better return from the pension that this amount was contracted into (most likely a final salary scheme). Have you checked your pension forecast using the government portal? https://www.gov.uk/check-state-pension

Are you sure you need to “pay several thousand to get the contribution back up.”? Normally, when contracted out, the pension forecast tells you that you cannot increase your SP. It does on mine.


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## Saluki (29 Sep 2021)

Lozz360 said:


> So what you are saying is, the more pension you pay, the less your employer pays? You pay 7.5% employer matches it, result is 15% contribution. You increase your payment to 10%, employer reduces theirs to 5%, result is still only 15%. That doesn’t sound correct or even legal. Your employer is effectively pocketing your additional 2.5% payment!


This is how payroll explained it. It didn’t sound right to me but I had other things on my mind at the time and failed to revisit it. She said they would match up to 7.5% and, if I chose to pay more they would contribute the difference between why I pay & 15%.
Academic now anyway, for this firm as notice is in and I start a new job soon.


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## PaulSB (29 Sep 2021)

Lozz360 said:


> It is not unusual to be contracted out of some your state pension. The chances are, that you will be getting a better return from the pension that this amount was contracted into (most likely a final salary scheme). Have you checked your pension forecast using the government portal? https://www.gov.uk/check-state-pension



I don't know the current rules but it used to be that if the contracting out provider could not offer a better return the law required they inform the customer of this and provide the option to contract back in.



> Are you sure you need to “pay several thousand to get the contribution back up.”? Normally, when contracted out, the pension forecast tells you that you cannot increase your SP. It does on mine.



The amount required will vary according to the individual circumstances. The term "fully paid up" can lead to misunderstanding. It's my understanding if one retires before state pension age the intervening years are not "paid up." An individual retiring at 60 with a state pension age of 67 can show all contributions are fully paid for the years he/she worked however for the years between 60 and 67 no contributions are paid.

There is also an illustration "You can improve your forecast" and shows the maximum the individual can achieve. Looking at this option one can view one's contribution record and those which are not paid through not working past 60, if this was the retirement age, will show as "year is not full." The amount to pay and the date by which it must be paid is also available.

I've done this a couple of times for my wife and it is always the years since she retired which show as unpaid and with every year that goes by that year is added. In my view paying up the contributions is a no brainer. In my wife's case it will give a 41% return on investment for life after the capital sum is repaid. Obviously one has to be sure of living long enough to at least repay the capital investment.


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## Low Gear Guy (29 Sep 2021)

I think the above applies to the old state pension. The new state pension requires 35 years of NI contributions for a full pension with no benefit from additional years. And no state pension unless you have paid in for at least years.


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## Bonefish Blues (29 Sep 2021)

Saluki said:


> I am quite astonished at how much people can put in, and how much their employer contributes too.
> If I put in 7.5% of my salary, the company will match it. If I put in 10% the company will only put in 5%. I double checked this with payroll and they confirmed it so I have a separate pension pot and put into that instead.
> very late to this pension thing as i didn’t start a pension pot when younger as I was very low waged and needed to do frivolous things like pay the rent and eat. Being a carer for 14 years didn’t help much either.
> 
> I will have a chat to my tame accountant, who is all over these things, and see what he advises.


Eh? Who designed that scheme, it's daft - unless there's a hidden reason I don't understand.


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## PaulSB (29 Sep 2021)

Low Gear Guy said:


> I think the above applies to the old state pension. The new state pension requires 35 years of NI contributions for a full pension with no benefit from additional years. And no state pension unless you have paid in for at least years.


You may be right but I'm unsure. I'm 67 and on the new state pension - first payment at 65 years 10 months. My wife will get the new pension at 66 next September. We both have 40+ years contributions.


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## Lozz360 (30 Sep 2021)

PaulSB said:


> The amount required will vary according to the individual circumstances. The term "fully paid up" can lead to misunderstanding. It's my understanding if one retires before state pension age the intervening years are not "paid up." An individual retiring at 60 with a state pension age of 67 can show all contributions are fully paid for the years he/she worked however for the years between 60 and 67 no contributions are paid.


So does this individual end up with a reduced pension if he or she pays no NI from age 60 to 67? Reason for asking is that I retired earlier this year at 61. My state pension is paid from age 66. I have 44 years of NI contributions. The pension forecast says that I cannot increase this pension value they are forecasting. However, is that statement assuming I will continue making NI contributions until I reach SP age? I wasn’t intending to pay anymore NI as I’m no longer working and understood I was fully paid up.


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## SpokeyDokey (30 Sep 2021)

Lozz360 said:


> So does this individual end up with a reduced pension if he or she pays no NI from age 60 to 67? Reason for asking is that I retired earlier this year at 61. My state pension is paid from age 66. I have 44 years of NI contributions. The pension forecast says that I cannot increase this pension value they are forecasting. However, is that statement assuming I will continue making NI contributions until I reach SP age? I wasn’t intending to pay anymore NI as I’m no longer working and understood I was fully paid up.



No, you do not need to pay any more NI to receive your forecast pension.

Only if you decide to take another job will you have to pay it by default subject to usual NI earnings level rules.

Not paid NI for yonks here and I am forecast for full NSP + some for SSP/S2P - some for contracted out = £10551 pa.


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## bikingdad90 (30 Sep 2021)

jowwy said:


> 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 think what wasn’t explained very well is that a scheme like C2W saves you tax but a similar scheme such as a pension defers that tax until a later date when you draw down from the pension pot but with careful planning and utilising the available cash free allowances you can keep it free of income tax entirely and enjoy the sacrificed salary as part of your pension where as with C2W you get to enjoy the bike as that is the enduring benefit.


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## PaulSB (30 Sep 2021)

Lozz360 said:


> So does this individual end up with a reduced pension if he or she pays no NI from age 60 to 67? Reason for asking is that I retired earlier this year at 61. My state pension is paid from age 66. I have 44 years of NI contributions. The pension forecast says that I cannot increase this pension value they are forecasting. However, is that statement assuming I will continue making NI contributions until I reach SP age? I wasn’t intending to pay anymore NI as I’m no longer working and understood I was fully paid up.


Yes, if my wife does not purchase additional years her NSP will be £25 lower than the full NSP. She can make additional contributions which will take her up to full NSP. She can make as many or as few contributions as she wishes. The NSP she receives will depend on how many she makes. As I said for her it's a no brainer and represents a 41% return for life after repaying capital. This assumes she lives for 29 months!!

The only way to answer the second part of your question is to run an NSP check on the website you linked to earlier. You'll get a forecast and if you can increase the forecast you will be able to see by how much. You don't pay more for what the forecast shows but do if it shows you can increase that forecast.

If your forecast is £179.40 or higher I don't think you'll be able to increase. Higher would mean you must paid extra contributions at some point - can't recall what they were called.


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