Pension vs Pay Rise

S

shipship

Registered User
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I know there's rules about salary sacrifice. But i presume there's no rules against negotiating an increase in pension contributions with your employer?

Is there potential drawbacks to this. Would it suggest to the employer that you're not in immediate need for higher pay or that you may consider retiring early? Or the it may reduce the compound effect of salary increase on future base pay.
 
shipship said:
Would it suggest to the employer that you're not in immediate need for higher pay or that you may consider retiring early? Or the it may reduce the compound effect of salary increase on future base pay.
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Yes, possibly.

If you're looking for a mortgage or other loan as a high multiple of salary, it could affect that too.

If you're in a position to negotiate, remember that a pension contribution is more tax-efficient for the employer too, as they don't need to pay Employer PRSI on a pension contribution, while they do if paying you salary. So the pension contribution should be a bit higher than the equivalent salary increase.
 
The issue with salary sacrifice is your contract of employment. If you get an increased pension contribution instead of a pay rise, you will have to get a new contract to reflect this. The bigger the organisation you are working in, the less likely they are going to do this as they won't want al la carte employment contracts.

As for indicating you intend to retire early, I wouldn't care about that. If you are in your late 50's/ early 60's, they may want to get rid of you anyway. They don't own you and if you want to be in a position to make life choices earlier than 65, that's up to you and not them.




Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Just from a tactical perspective, I wouldn’t look to benefit from the Employer PRSI point.

I’d raise it, just to say “this is actually better for the company”.

But personally I wouldn’t look too favourably on someone asking me to facilitate them and pocket the extra cash too.

Just my view.
 
That's a good point, I'd never considered the complications of employment contacts before but it could ultimately be a minefield to administer with, in theory, every employee on differing contribution rates. Less hassle for the Payroll section to have a one model for all employees to be worked through... some employers have even outsourced the administration of the Cycle To Work scheme, and that's much less complicated!
 
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