Anyone in one of these?
AFAIK you agree to a £Xk pay cut in return for your employer putting £Xk into your pension each year.
Plenty of obvious pitfalls (anything that multiplies your salary, reduncancy, mortage, bonus, whatever), the only advantage is you pay into your pension before NI rather than after (ditto for the company with employers NI).
I had one, it worked.
Not sure what the Q is?
Not sure what the Q is?
Have I got the gist of it right?
&
Confirmation that it's not just a novel way of the company getting everyone to agree to a pay cut before announcing it's closing the pension scheme entirley allong with all contributions.
as long as any future pay increases are on the whole package and not just 'take home' pay and that you understand waht impact on redundancy is then it's not different to any other pension contribution that's taken before tax and NI is it?
Confirmation that it's not just a novel way of the company getting everyone to agree to a pay cut before announcing it's closing the pension scheme entirley allong with all contributions
I do it. It works. Mortgages etc are all calculated on net pay so you will be up on this deal here as well.
You should still retain a "reference salary" that is effectively what you get paid before all the sacrifice schemes. This should stop your employer pulling a fast one unless they are proper shits.
We have this available at work, but I've not got round to signing up for it yet...
I have one too.
These people can keep you right on what to do about pensions
http://www.pensionsadvisoryservice.org.uk/
ever heard of the cycle to work scheme...........
same thing
quite a normal thing
Downsides:
You don't get to see the monies until you retire.
The company could go bust, and there would be no pension monies (if final salary).
Your investments don't deliver (if cash scheme).
If you've any debts, get them paid off first.
Upsides:
Another way to keep your earnings lower to ensure you get the Child Benefit
A bit extra cash goes in.
I think you have it right!
My previous employer did it, a way of getting more for the £, and they weren't (in that respect) dodgy at all.
Its called Salary sacrifice.
You give (for example) £100 of your salary for something else worth £150. You don't get taxed on the £100 becuase you don't "earn" it.
Best example is childcare vouchers - you give up £150 and get £243 in return. As you would have paid at least 20% (approx) on taxes on the £150, you've actually got a "free" £123 (150 - 30 = 120, difference between 243 is 123) of (in this case) money for childcare.
Of course if you are a 40% tax earner its even more beneficial as you would have recieved only £90 of the original £150, therefore you are £153 better off.
I'm in one. None of the hassle of having to reclaim tax/adjust tax code, no paying NI on your contributions & my company pay the NI they would have paid on my contributions into my pension too, meaning I get an increase of 13.8%.
jfletch has it right on the mortgage & reference salary too.
Executive summary - you need to get some proper advice
The employer saves their national insurance, something like 10% or 14% - so if they do the same amount X in salary or pension they are benefitting.
EDIT: just seen above that the employer there pays the extra - what is yours proposing ?
As noted above the employer benefits as redundancy etc is calculated on salary, also is it a final salary scheme - if so that could work against you
Why would you not just make your own AVC (Additional Voluntary Contribution) - ie put these amounts into your pension at your discretion at the end of each year based on whether you think you can afford it ? There is a slight timing issue here as you have to claim the tax back later if you do a lump sum, you can do regular avc's monthly.
I think the level of your salary wrt national insurance rates is important.