Looking for some advice around pension/salary sacrifice

[ladymuck]

I'd be inclined to talk to an IFA rather than a bunch of randoms on'tinterweb.

Whilst we can suggest things that we have done, would have done, or would do, only you know exactly where your money is currently invested, how much has been paid in and when, what types of policies you got and their restrictions.

A good IFA will be able to make sense of all that and give you options for dealing with it all.

[daleric]

If you opt out, you are turning down free money. Albeit not a massive amount but I wouldn't do that myself.

Best option is salary sacrifice into your present scheme. At a later date you can move it to a SIPP of your choice, should you prefer.

Thanks for the quick response. I'll need to confirm that NEST are able to handle salary sacrifice, I know they're not on the list of Paystream's preferred vendors.

If not, I'll likely need to set up a fund elsewhere that I salary sacrifice into.

[daleric]

I'd be inclined to talk to an IFA rather than a bunch of randoms on'tinterweb.

Whilst we can suggest things that we have done, would have done, or would do, only you know exactly where your money is currently invested, how much has been paid in and when, what types of policies you got and their restrictions.

A good IFA will be able to make sense of all that and give you options for dealing with it all.

Thanks, it's definitely something I'm considering even just to get some reassurance on.

[Bodger]

Out of the list that Paystream use, I'd recommend Hargreave Lansdown for the low fees and relatively open platform.

For your auto-enrollment with NEST, is that through Paystream?

If you are going to salary sacrifice, then you might as well stop the auto-enrollment. NEST fees are high.

For the people saying free money from Employer contributions - Paystream isn't contributing a penny here, it's coming out of the money paid to your umbrella by your client, and therefore indirectly from you. Paystream aren't funding pensions with the £20 a week they charge

[Fred Bloggs]

Out of the list that Paystream use, I'd recommend Hargreave Lansdown for the low fees and relatively open platform.

For your auto-enrollment with NEST, is that through Paystream?

If you are going to salary sacrifice, then you might as well stop the auto-enrollment. NEST fees are high.

For the people saying free money from Employer contributions - Paystream isn't contributing a penny here, it's coming out of the money paid to your umbrella by your client, and therefore indirectly from you. Paystream aren't funding pensions with the £20 a week they charge

OK, badly phrased. Employer pension contributions aren't subject to employers or employees NI. If you opt out of auto-enrollment pension contributions and take the money, then both NICs will be paid out of that pot of money. If you then pay yourself into a SIPP, you get income tax relief but you cannot claim back NICs once they have been paid. Hence the benefit of salary sacrifice. It's not a lot of money, but it's there.

[SimonMac]

It's the Umbrella that decides the monthly contributions, not the SIPP provider.

Not quite, there are some Umbrellas that let you state how much you want to pay into your pension, shop around (or just use NASA who i do)

[SimonMac]

Hi folks,


I've got a few questions that I'm hoping someone can answer for me -

• Will 10-15% of my income be enough through my 30s? I'm assuming as I get older I will be increasing this over time. I might not be contracting forever, but I'm confident I can move into a relatively well-paying permanent role if I stop contracting.
• Having searched online I can see people recommending Freetrade and Interactive Investor. I'm guessing moving forward I should be looking at setting up a SIPP with one of these companies to salary sacrifice into?
• Do these companies only offer a set amount in £'s as contributions, or can I use a % based system? I find using a % of my income to be an easier system.
• If I was to move back to a permanent role, can I keep using one of the above providers as my pension provider or am I wrong in thinking that's how it works? Would I be better using the employer's pension scheme?
• Any other general tips anyone can give to someone contracting for less than a year?

I appreciate anyone that gives this a read, I'm a bit stressed worrying about retirement and having no money.

1) No one can answer that, you will need to have an idea as to how much you want your pension to be worth each year when retiring (don't forget to include inflation of about 2.5% per year, so £40k now will be ~£60K in twenty years). Work out what size pension pot you will need to take that income and then work out if you are putting enough in, a plus point for you is that you are starting young so time is on your side.

2) Probably, they are some of the biggest, another to look at is Hargreaves Landsdown but you will need to know what type of investment you will hold as fees will differ (HL is the simplest but expensive if holding Unit Trust as they don't cap the fees on open ended funds, Investment Trusts or Shares its fine as they cap the fees at £200 a year)

3) You are confusing terms, the SIPP provider does not determine how much you put in, you do, they may have a minimum amount per month but this is likely to be much lower than you are considering so not a problem. The consderations that you have choosing a SIPP is what type of payment they accept, some demand a direct debit set up so they can take payments when they want to, umbrellas tend to want to make a bacs transfer when they want to

4) Permies will pay into their own pension scheme, you can opt out and make direct pension contributions to a SIPP and claim some tax relief but it won't be as efficient as a salary sacrifice.

5) Build a war chest first, pay off all debts, max out ISA and then thing about the pension in that order, and speak to an IFA as you need one (based on the questions you have just asked) as you should never listen to anyone on an internet forum

[eek]

If you are using an umbrella you really should be using Salary Sacrifice for any and all pension contributions - basically workplace pensions make zero sense unless you receive a PAYE "salary".

Because of the way Employer NI works and the way an Umbrella calculates your taxable income any employee pension contributions you make that aren't done via Salary Sacrifice are paid from money where HMRC has already taken 13.8% employer NI from the pension contribution.

[eek]

5) Build a war chest first, pay off all debts, max out ISA and then thing about the pension in that order, and speak to an IFA as you need one (based on the questions you have just asked) as you should never listen to anyone on an internet forum

Not so sure about that if you are using an umbrella.

I would be going warchesk, debts then pension over ISA. Little point throwing £18k or even £10k into an ISA if you can be throwing £40k into your pension instead

Remember when you are on £100k+ a year the tax above £100k (due to losing your personal allowance) is so bad for umbrella workers that I would be throwing everything I could above £100k into the pension pot.

[ladymuck]

Not so sure about that if you are using an umbrella.

I would be going warchesk, debts then pension over ISA. Little point throwing £18k or even £10k into an ISA if you can be throwing £40k into your pension instead

Remember when you are on £100k+ a year the tax above £100k (due to losing your personal allowance) is so bad for umbrella workers that I would be throwing everything I could above £100k into the pension pot.

What if your ISA is your warchest?