Page 20 - Budget Newsletter - March 2023
P. 20
A worthwhile sacrifice
Personal Salary sacrifice
contribution employer contribution
(sacrificed amount +
NIC saving)
Tax rate 20% 40% 20% 40%
£ £ £ £
Gross salary 1,000 1,000 Nil Nil
Employer pension contribution Nil Nil 1,138 1,138
Employer NIC (13.8%) 138 138 Nil Nil
Total employer outlay 1,138 1,138 1,138 1,138
Employee salary 1,000 1,000 Nil Nil
Less:
income tax (200) (400)
NICs (12.0%/2.0%) (120) (20)
Net pay = net pension contribution 680 580
Tax relief 170 386.7
Total pension contribution 850 966.7 1,138 1,138
Planning Point
The increase in the money purchase annual allowance has made phased retirement easier by
allowing greater pension contributions after pension benefits have started to be drawn. More
than ever, retirement does not need to be a cliff edge event.
19
