Ok, thanks for the info, that has all helped explain a bit more, thanks.
Just be aware this will also affect the amount of pension your employer pays in as your salary is 'reduced'.
The current lease prices aren't anything like as good as they were 12 months ago - over £400 per month (after tax) as indicated above for a Kia.
I've looked at my employer's scheme and decided just to stick with my old car and save £400 a month as I just don't drive it enough - just 3,000 miles last year.
Just be aware this will also affect the amount of pension your employer pays in as your salary is ‘reduced’.
This is employer dependent. For my company, salary sacrifice of any form makes no difference to your pension contributions - unless you’re sacrificing for additional contributions 🙂
Yeah, used to be the same for us although I need to check that's still the case.
What happens if you go into the salary sacrifice scheme then decide to move on (or made redundant). Seems to me that the deal is administered between payroll and the respective lease company, so if you move to a new employer, you kind of have a problem? Am I missing something (like reading page one of this thread?)
That problem becomes your ex-employer’s problem, not yours. But you do obviously lose the car. (Unless you could wangle a new deal with the leasing company directly, noting that it would not be salary sacrifice.)
We’ve had cars go back into a pool available for somebody else to take up (at reduced rate.) or the company takes the hit and buys out of the deal with the leasing company to terminate early. In reality the cost of this is probably built into the rate you pay per month, a kind of insurance for the lease company spread across all lease holders.
That problem becomes your ex-employer’s problem, not yours. But you do obviously lose the car. (Unless you could wangle a new deal with the leasing company directly, noting that it would not be salary sacrifice.)
I think that depends on the small print. C2W is normally on you to pay off the remainder, a traditional company car used to belong to the company, but in the modern schemes (where your employer is just carving out your salary and giving it to a lease company), I wouldn't be surprised if your responsible for paying off the remainder and keeping the car till the end
It’s not in my company. I was very clear to understand the T&Cs before signing my salary sacrifice lease… it’s a lot of money to be on the hook for if you don’t understand what’s going on!
unless you are signing the lease, then the liability/issue sits with you?? I heard from a friend that the scheme he was looking to rollout had this problem, so they ended up removing the idea from their ESG strategy until a better solution could be found.
From our Scheme with Tusker:-
Pensions in both schemes are accrued based on the amount of gross pensionable pay that employees earn. The amount of salary sacrifice taken for an electric vehicle will be subtracted from this gross pensionable pay and will therefore reduce the pension you accrue while the salary sacrifice contract is active.
As your pensionable pay is reduced you will also pay less in pension contributions. The rate at which you pay your pension contributions may also change, as the rate payable will be re-assessed against your annual pensionable pay LESS the sacrificed amount.
Check this out with your pension as that's potentially a fair chunk at Gross - e.g. £700 a month gross would be £70 or so less from me and £140 from my employer.
I’m also with Tusker and mine doesn’t work like that. As others have said, no affect on either mine or my employer’s pension contributions. No buy out of lease etc needed if employment is terminated (under all circumstances.) I think I’ve said previously, employers probably negotiate with Tusker a set of T&Cs that fit their policies/budget. Additionally, some of the T&Cs set by Tusker will in fact deride directly from your own HR/comps&bens policy. As always, the devil is in *your particular* detail.
Make sure you do check YOUR SCHEME as this is a quote for a Kia Niro
Kia Niro SUV 5Dr 0.0Electric 64.8kWh 201 2 Auto
Monthly amount:£666
Employer contribution:-£72
Monthly gross reduction :£595
Income Tax saving:-£205
National Insurance saving:-£12
Pension contribution saving:-£51
Benefit in Kind:+£12
Effect on take home pay:£340
As others have said, different employers will have different deals - Tusker here and no pension impact
Yep. Our is Arval, no pension impact. If you resign you have to pay a termination fee, which is three months lease in the first year, two in the second, and one in the third. If you’re made redundant the company pay the termination fee.
Basically, all companies are different in how they and their supplier run the scheme, even down to the rates and cars they offer. There’s no point looking at what other people pay for cars with other employers because you can’t access that scheme. You just need to decide if you’re happy with what’s being asked for the car you want with your scheme.
Monthly amount:£666
Employer contribution:-£72
Monthly gross reduction :£595
Income Tax saving:-£205
National Insurance saving:-£12
Pension contribution saving:-£51
Benefit in Kind:+£12
Effect on take home pay:£340
Apologies if I've misunderstood, but this seems like a really dangerous ( not really, but roll with it...) way of looking at it.
There is no "Pension Contribution Saving". You're paying less into your pension and thus will get less pension as a consequence. You're not actually saving £51. In fact it's the exact opposite, literally You're saving £50 less.
And indeed you could unilaterally decide to do that regardless of whether you have a company car or not.
Or have I misunderstood you?
That problem becomes your ex-employer’s problem, not yours.
Not where I work, it's your problem whether you leave/laid-off.
+4 years ago it worked out the same price for getting a new car through work (that I'd never own) as buying the same car used & 6 months old myself - I went with the 2nd option.
It's also why I've never used them for C2W, they take off the gross balance from your last payslip if you leave/laid-off.
This is the wording Tusker used on the quote - it's misleading.
Exactly it's not a saving. With that particular quote, the employee would be getting around £150 less going into their Scheme - £50 employee and about £100 employer.
This is in Higher Education.
It’s also why I’ve never used them for C2W, they take off the gross balance from your last payslip if you leave/laid-off.
That interesting, they must have put a clause in the sign up agreement. As above the lease is with your organisation, not the individual. I know of people who have just walked away from Salary Sacrifice cars.
Yes you do loose pension. Even employer contribution remains paying 10% pension contribution, its 10% of a lower salary.
Other pitfalls include trying to get no claims recognised after you end a lease arrangement. And even after you hand a car back 9 out of 10 times you will still continue to pay BIK charges the following financial year which can be a big hit if you are then financing a new vehicle else where.
I've done it in the past and got some very nice cars very cheaply through the schemes, but I dont think they are as appealing as they used to be.
Can we just be clear:
Yes you do loose pension. Even employer contribution remains paying 10% pension contribution, its 10% of a lower salary
You MAY lose pension, dependant on YOUR particular scheme agreement. Some will, some won’t dependant on your scheme/company’s T&Cs, even if the car lease company is the same as others.
You MAY lose pension, dependant on YOUR particular scheme agreement. Some will, some won’t dependant on your scheme/company’s T&Cs, even if the car lease company is the same as others.
How can that be? Are you saying the employer makes up the pension shortfall ? ie
IF you earn £40k @ 10%= £4,000 pension contribution
Salary Sacrifice is £5k making salary £35k @ 10% = £3,500 pension contribution
From the Horses Mouth (Gov.uk) - the answer is it varies, hence checking your Scheme.
The Employer can chose either the reduced salary or the notional original salary !
Effect of salary sacrifice on payments and benefits
Earnings related payments
Employers usually decide how earnings related payments such as occupational pension contributions, overtime rates and pay rises are calculated.
Such payments can be based on the notional salary or the new reduced cash salary, but this must be made clear to the employee.
So where your pension is affected, that £360 a month for 'the car' is really costing me £510 as there is £150 of pension contributions'lost'
Something to be very wary of if that is how your scheme is calculated. All compounded with leasing costs being so much higher.
So if its done on notional , then that means the company is picking up the pension shortfall. Good on them if they decide to do that !
How can that be? Are you saying the employer makes up the pension shortfall ? ie
Absolutely this is how it works at my company (large telco). Salary sacrifice has no impact on pensionable pay - they make it very clear that it's calculated on your gross salary. To be honest I'm surprised anywhere does it differently (same at my last employer).
All that being said, I can't see the point of salary sacrifice car schemes. The lease cost is inflated so that once the tax savings are taken into account then the actual cost is about a fiver cheaper per month than a normal commercial lease. Seems scammy.
I’m in British airWays - we have a “pensionable pay scale” which is linked to my actual pay, but a fixed amount at each increment, so my pension input doesn5 change with a salary sacrifice car.
The lease cost is inflated so that once the tax savings are taken into account then the actual cost is about a fiver cheaper per month than a normal commercial lease.
i have compared the deal I am signing up for with Tusker vs doing it as a private customer through BMW dealership - Tusker version works out about £200 better off per month for me.
Or… the company decides not to save (it was already paying the same level of contribution previously.) but either way, it’s a good touch.
Still not sure how from a tax compliance perspective it can be ok to operate the scheme in two different ways. But… it must be ok as so many companies do operate it either way. I guess a decision on which way comes down whether your org wants to be tight-arsed about it.
All that being said, I can’t see the point of salary sacrifice car schemes. The lease cost is inflated so that once the tax savings are taken into account then the actual cost is about a fiver cheaper per month than a normal commercial lease. Seems scammy.
Depends very much on the car and the provider. When I took my current car, the net payment was around £200 per month cheaper than I could find on the open lease market (as a personal lease - can’t get a business one if you’re an employee) and mine includes insurance, any maintenance and tyres, and no deposit. Today it’s £350 less than the open market.
I’m about to swap and will shortly be ordering a Polestar 2. Cheapest I can find on leasing.com for the same term and mileage age is 900 quid. I’ll be paying £650 all inclusive.
Salary sacrifice is also useful for making sure your taxable income stays within certain brackets. So it’s not just about the price of the vehicle as in taking it you may keep another benefit, for example tax-free child care, that also has considerable value to you.
Everyone’s circumstances are different though, and what works for one, won’t necessarily work for another.
will shortly be ordering a Polestar 2. Cheapest I can find on leasing.com for the same term and mileage age is 900 quid. I’ll be paying £650 all inclusive.
Similar numbers here, though going for an i4 on a 15k mile a year, 4 year, fully incl deal.
Salary sacrifice is also useful for making sure your taxable income stays within certain brackets. So it’s not just about the price of the vehicle as in taking it you may keep another benefit, for example tax-free child care, that also has considerable value to you.
Good point, I achieve the same thing by dumping money in my pension. Does make sense if the mileage is high I guess.
Good point, I achieve the same thing by dumping money in my pension. Does make sense if the mileage is high I guess.
Dumping money in a pension is much more beneficial than burning money on a lease.
I assume those of you going for the scheme do fairly big mileages anyway ? My car did just 3000 miles last year, so £600 a month is just madness. £20 a day to sit on the drive as I commute on my bike.
I started the original thread as I was mulling over salary sacrifice lease of an EV, but waiting lists were long and prices were high (over a year ago)... Now price inflation seems to have rocketed further, supply seems a bit better but it's honestly not a very economical way to get in a new EV (if there even is such a thing) I ended up sacking the idea off all together.
Dumping money in a pension is much more beneficial than burning money on a lease.
Some people privileged enough to be able to do both.
