Salary sacrifice - help!
ruthiebusybee
Member
in General
Hi all
Having a complete mental block on this:
Basic rate tax payer wants to give up £1200 pa from their take-home pay, what will be their annual sacrifice?
£1200/(1-0.32) = £1764.71
0.32 = tax @ 20% and NI at 12%.
Employers are adding on NI too, so 13.8% of the give up - £243.53
Salary sacrifice is £1764.71 and annual employer pension contribution is £2,008.24.
Ie, give up £100 net pay per month and get employer pension contribution of £167.35.
Is that right?
Ruth Baker
Comments
this is a god-send: https://adviser.royallondon.com/pensions/supporting-your-business/tools/salary-exchange-calculator/
If you state their pre-doing-any-of-this salary, we can compare calcs?
EDIT: Actually, this calculator is for working out how much to sacrifice - not quite the same thing.
Pre salary is £27,495, so sacrifice will be from full 20% and full 12% NI band.
Ruth Baker
what is the standard employer contribution - 5%?
To contribute £1,200 and move to salary sacrifice, you can enhance the contribution to £1,411.76 and have the same net pay (as you would if you paid from net pay).
The employer (if 5%) can contribute £1,569.58 to achieve the same as 5% plus NI, 100% of their NI saving.
Total pension contribution £2,981.34 and member is able to contribute a further £406.59 by using Sal Sac with not extra cost to employer or member
I'm not sure if I should have done £1,500 (which would be £1,200 net contribution if Sal Sac not used), if so:
To contribute £1,500 and move to salary sacrifice, you can enhance the contribution to £1,764.70 and have the same net pay (as you would if you paid from net pay).
The employer (if 5%) can contribute £1,618.28 to achieve the same as 5% plus NI, 100% of their NI saving.
Total pension contribution £3,382.98 and member is able to contribute a further £508.23 by using Sal Sac with not extra cost to employer or member
Thanks @arongunningham much appreciated
Ruth Baker