- 1. Salary Sacrifice Pensions Technical Services September 2009
Pensions Investment Protection
2. What is Salary Sacrifice?
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- Varying terms and conditions
3. The opportunity
Higher pension savingsNo additional cost 4. What would you like
in your pension pot? Note: higher rate tax payer SalarySacrifice 5.
For every 1 you earn
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- Even with added tax relief, still only 86p
- But with Salary Sacrifice:
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- Plus employer NI saving of 12.8%
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- Total employer contribution of1.13
Note: basic rate tax payer 6. For every 1 you earn
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- Even with added tax relief, still only 98p
- But with Salary Sacrifice:
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- Plus employer NI saving of 12.8%
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- Total employer contribution of1.13
Note: higher rate tax payer 7. Example report
- Sacrifice 1,391 from gross pay
- Contributionsupby369a year* (30.75 each month)
- No extra cost to employer
*assumes tax year 2009/10 and includes full employer NI saving
Before sacrifice After sacrifice Gross earnings 30,000 28,609
Income tax 4,465 4,427 NI 2,671 2,518 Earnings less tax and NI
22,864 21,664 Personal contribution (gross) 1,200Nil Net income
21,664 21,664 Company contribution* Nil 1,569 8. Notional or
reference salary
- The notional or reference salary may be used to:
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- determine an increase in pay
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- work out entitlement to holiday pay, sick pay etc
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- calculate other non-pension benefits, like death in service
benefits
9. Which benefits might be adversely affected ?
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- State Second Pension (S2P)
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- Working family tax credit
10. Setting up Salary Sacrifice
- Salary given up before received
- Letters exchanged before first payment
- Usually month before sacrifice comes into force
- Sacrifice should be for at least 12 months
- Care over bonus sacrifice and timings
11. Arranging the sacrifice Example letter (on company headed
paper) Dear With effect from dd/mm/yy your salary will reduce by xx
pa (from yy pa to zz pa). In return we will pay a pension
contribution of aa pa on your behalf. Please indicate your
agreement to this reduction by signing both copies of this letter
and returning one copy. For and on behalf of the company .. I
confirm my agreement .. Date .. (prior to the date shown above) 12.
HMRC help
- http:// www.hmrc.gov.uk/specialist/salary_sacrifice.htm
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- Future remuneration must be given up before it is treated as
received
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- Revised contractual arrangement must be that the employee is
entitled to lower cash remuneration and a benefit
13. Website example 14.
AEGON and Salary Sacrifice Note: higher rate tax payer
SalarySacrifice Good luck 15. Important information from our
lawyers
- This information is based on AEGON Scottish Equitables
understanding of current legislation, taxation law and HM Revenue
and Customs practice which may be subject to change.
- Scottish Equitable plc, Registered Office: Edinburgh Park,
Edinburgh EH12 9SERegistered in Scotland (No 144517).Authorised and
regulated by the Financial Services Authority. Member of the AEGON
Group. www.aegonse.co.uk