pension boost
[originally posted Thursday 22nd January, 2009]
Gold-plated final salary schemes are practically a thing of the past, with most employers closing this type of plan (expensive) in favour of money purchase schemes or stakeholder pensions (cheaper).
If don’t have a Salary Sacrifice scheme in place you may well be missing out on important additional benefits.
Salary Sacrifice has been around since the end of 2004, and it means that basic rate tax payers can boost their pension contributions by 31% without impacting their take home pay. And that’s in addition to the tax advantages that your pension contributions already attract. A very large number of UK employees can benefit from Salary Sacrifice, regardless of their income level.
How does it work? Essentially you arrange for your employer to make pension contributions on your behalf, in exchange for a reduction in salary. Both you and your employer save on National Insurance. It’s this saving in employee National Insurance and income tax on the amount diverted to your pension which means your take home pay remains unchanged. Get it?
Salary Sacrifice can be a really good way to boost your pension contributions. Is it right for you? If you don’t have any pension in place, or you’re in a money purchase scheme (including personal pension plans (PPP) and stakeholder pensions) or have a final salary arrangement you may well benefit from Salary Sacrifice. We suggest you seek professional advice from a suitably qualified IFA.
