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Reminds me I should see about contributing more to my pension. We have two options
You sacrifice some of your salary to your pension. This figure is deducted from your gross salary, so you do not pay tax and ni on the amount you have sacrificed. The total deducted is then paid into your pension scheme along with 50% of the Employer’s NI savings that we as company save by you sacrificing some of your salary. For instance, if you chose to sacrifice £100 per month the total amount paid into your pension scheme per month is £106.90. (£100.00 x 13.8% / 2 = £106.90).
You choose to pay into your pension from your net pay. This is taken after you have paid tax and ni. The total deducted is then paid into your pension scheme but is then topped up by HMRC by 20%. For instance, if your salary is £1,200 per month and you choose to pay an employee pension of 2% per month then £24 – 20% is paid into your pension scheme but is then topped up by 20% by HMRC. (£24 + 20% = £28.80)
I've no idea which one. Let's say I don't need the extra cash I'd be dumping in the pension, which of these would you choose and why? Normally I'd take the one the offered the lower tax amount but now I've no idea.
hippy-
Salary sacrifice, extra free money
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Salary sacrifice is better generally. For the same net pay you get more in your pension. (Free money basically.) If you had children or some other specific tax circumstances it can help because as far as the taxman is concerned you're earning less.
The main downside is if you have a mortgage I think as the bank will think you earn less than you actually do, so if you have to do affordability checks it can impact that. But you can just reduce your salary sacrifice to zero 3 months before mortgage renewal and the bank won't care.
There are some other downsides here:
Basically take the free money
M4xime
frankenbike
You're better off paying into a pension unless you have unusual circumstances. You're contributing post-tax income to the LISA whereas a pension is pre-tax. The 25% bonus is less than what you've paid in tax
(You are taxed on withdrawal from the pension though, LISA can be accessed before 60, etc.)