Salsac Av Brainshark Aug09 Jrr V3 Draft

384 views

Published on

Published in: Technology, Economy & Finance
  • Be the first to comment

  • Be the first to like this

Salsac Av Brainshark Aug09 Jrr V3 Draft

  1. 1. Salary Sacrifice Pensions Technical Services September 2009 Pensions Investment Protection
  2. 2. What is Salary Sacrifice? <ul><ul><li>A simple idea </li></ul></ul><ul><ul><li>Salary </li></ul></ul><ul><ul><li>Contractual bonus </li></ul></ul><ul><ul><li>Discretionary bonus </li></ul></ul><ul><ul><li>Varying terms and conditions </li></ul></ul>
  3. 3. The opportunity <ul><ul><li>Higher pension savings </li></ul></ul><ul><ul><li>No additional cost </li></ul></ul><ul><li>Too good to be true? </li></ul>Higher pension savings No additional cost
  4. 4. What would you like in your pension pot? Note: higher rate tax payer Salary Sacrifice
  5. 5. For every £1 you earn… <ul><li>Before Salary Sacrifice: </li></ul><ul><ul><li>69p in your hand </li></ul></ul><ul><ul><li>Even with added tax relief, still only 86p </li></ul></ul><ul><li>But with Salary Sacrifice: </li></ul><ul><ul><li>Tax relief </li></ul></ul><ul><ul><li>Plus employer NI saving of 12.8% </li></ul></ul><ul><ul><li>Total employer contribution of £1.13 </li></ul></ul>Note: basic rate tax payer
  6. 6. For every £1 you earn… <ul><li>Before Salary Sacrifice: </li></ul><ul><ul><li>59p in your hand </li></ul></ul><ul><ul><li>Even with added tax relief, still only 98p </li></ul></ul><ul><li>But with Salary Sacrifice: </li></ul><ul><ul><li>Tax relief </li></ul></ul><ul><ul><li>Plus employer NI saving of 12.8% </li></ul></ul><ul><ul><li>Total employer contribution of £1.13 </li></ul></ul>Note: higher rate tax payer
  7. 7. Example report <ul><li>Sacrifice £1,391 from gross pay </li></ul><ul><li>Net income stays same </li></ul><ul><li>Contributions up by £369 a year* (£30.75 each month) </li></ul><ul><li>No extra cost to employer </li></ul>*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) £1,200 Nil Net income £21,664 £21,664 Company contribution* Nil £ 1,569
  8. 8. Notional or reference salary <ul><li>The notional or reference salary may be used to: </li></ul><ul><ul><li>determine an increase in pay </li></ul></ul><ul><ul><li>calculate overtime rates </li></ul></ul><ul><ul><li>work out entitlement to holiday pay, sick pay etc </li></ul></ul><ul><ul><li>calculate other non-pension benefits, like death in service benefits </li></ul></ul>
  9. 9. Which benefits might be adversely affected ? <ul><li>State benefits </li></ul><ul><ul><li>Contribution based: </li></ul></ul><ul><ul><ul><li>Incapacity benefits </li></ul></ul></ul><ul><ul><ul><li>Jobseekers’ allowance </li></ul></ul></ul><ul><ul><li>Earnings related: </li></ul></ul><ul><ul><ul><li>State Second Pension (S2P) </li></ul></ul></ul><ul><ul><ul><li>Maternity allowance </li></ul></ul></ul><ul><li>Tax credits </li></ul><ul><ul><li>Child tax credit </li></ul></ul><ul><ul><li>Working family tax credit </li></ul></ul>
  10. 10. Setting up Salary Sacrifice <ul><li>Salary given up before received </li></ul><ul><li>Letters exchanged before first payment </li></ul><ul><li>Usually month before sacrifice comes into force </li></ul><ul><li>Sacrifice should be for at least 12 months </li></ul><ul><li>Care over bonus sacrifice and timings </li></ul>
  11. 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. 12. HMRC help <ul><li>http:// www.hmrc.gov.uk/specialist/salary_sacrifice.htm </li></ul><ul><ul><li>Future remuneration must be given up before it is treated as received </li></ul></ul><ul><ul><li>Revised contractual arrangement must be that the employee is entitled to lower cash remuneration and a benefit </li></ul></ul>
  13. 13. Website example
  14. 14. <ul><ul><li>Pension planning tools </li></ul></ul><ul><ul><li>Marketing literature </li></ul></ul><ul><ul><li>Individual illustrations </li></ul></ul><ul><ul><li>Group illustrations </li></ul></ul>AEGON and Salary Sacrifice Note: higher rate tax payer Salary Sacrifice Good luck…
  15. 15. Important information from our lawyers <ul><li>This information is based on AEGON Scottish Equitable’s understanding of current legislation, taxation law and HM Revenue and Customs practice which may be subject to change. </li></ul><ul><li>Scottish Equitable plc, Registered Office: Edinburgh Park, Edinburgh EH12 9SE Registered in Scotland (No 144517). Authorised and regulated by the Financial Services Authority. Member of the AEGON Group. www.aegonse.co.uk </li></ul>

×