Salary Vs Pension

Looking for advice.

My husbands current employer has decided to sell. He has worked for him for 26years and my husband is thinking of looking for a new career path. He has 40k in company pension.

He has been approached with a job offer.
I will use 1k for ease.

If he makes 1k gross he will take home 767 a wk.

Can he ask to have this split 600 salary & 400 straight to pension, as I feel this might be a good opportunity to pump into his pension & not be salary sacrifice if negotiated before he starts.

Any issues or downside? From reading threads I think the employer has no pension limit.
We have no loans or mortgages & I'm a post 2004 PS.
Thanks for reading.

You'll get more informed answers if you fill in the Money Makeover template as there might be other factors we're not aware of. But if I were in your husband's position I would be doing as you say; ask for as much of the pay package to come as employer contributions as you can sustain.

Maybe this is common sense, but watch out that the employment contract makes it clear your husband is entitled to these employer contributions without condition. You don't want to be in a position where the company needs to cut costs so can reduce the pension contribution even though you consider that guaranteed "pay".

I think there is an issue here, although I'm no expert - but don't think you can do this according to regulations:

From https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-03.pdf

3.8 Salary sacrifice
Any arrangement under which an employee waives an entitlement to remuneration or accepts a reduction in remuneration, in return for a corresponding payment by the employer into a pension scheme, is considered to be an application of the income earned by the employee rather than an expense incurred by the employer. Such arrangements are subject to the provisions of section 118B TCA, which deals with Revenue approved salary sacrifice arrangements.

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Additionally, see https://www.crowe.com/ie/insights/salary-sacrifice-arrangements - listing things NOT allowed:

Where an employee waives an entitlement or accepts a reduction in remuneration in exchange for a corresponding payment by their employer into their pension scheme, this is considered to be an application of income earned by the employee and as such the full amount remains taxable under Schedule E. For example, if an employee waives €10,000 of their salary to be put directly into a pension scheme instead, this €10,000 is fully taxable. Even if the sum had never reached the employee, it is taxable as if it had been paid directly to them.

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That would seem to cover your situation.

Innisfree said:

I think there is an issue here, although I'm no expert - but don't think you can do this according to regulations:

From https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-03.pdf




Additionally, see https://www.crowe.com/ie/insights/salary-sacrifice-arrangements - listing things NOT allowed:


That would seem to cover your situation.

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The resident accountants here will hopefully weigh in, but my understanding is that you run into salary sacrifice issues where you try to take something you are already being paid and taxed on and try to shelter it - eg. I decide that for next year I'll drop my salary and ask for an employer contribution instead, or I usually get my bonus through PAYE but ask for it to be an employer contribution going forward. I understood that new employments or starting to receive a bonus you were not previously entitled to is generally considered differently, at least by my accountant and one or two others I have spoken to.

Zenith63 said:

The resident accountants here will hopefully weigh in, but my understanding is that you run into salary sacrifice issues where you try to take something you are already being paid and taxed on and try to shelter it - eg. I decide that for next year I'll drop my salary and ask for an employer contribution instead, or I usually get my bonus through PAYE but ask for it to be an employer contribution going forward. I understood that new employments or starting to receive a bonus you were not previously entitled to is generally considered differently, at least by my accountant and one or two others I have spoken to.

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May well be true for a new employment, it's definitely something I would get professional advice on before starting anyway - could be an expensive mistake if not all kosher in one's particular situation.

Thank you both for replying.

I have read both your links Innisfree & presumed the same as Zenith63 that it only applies to current employer..

But that if starting with a new employer he could negotiate & start a new contract stipulating the above split & that would not be seen as salary sacrifice then??

Can anyone clarify as we don't want to approach the new employer with this is not above board..
Thanks

It would not be salary sacrifice.

It’s fine to agree a contract like that at the outset.

I hope your husband has discussed redundancy or TUPE with his current employers. A lump sum may give him an option to purchase AVCs instead.

Thank you Gordon.

My husband asked current employer about redundancy, as that would have been preferred, but he said the new employer will take on the current staff so no redundancy (said couldn't afford it & role is needed) but TUPE seems to apply. He had planned to stay in current role until was approached this week. It may come to nothing but he's looking at options to get a change from what he's being doing for 26yrs.

Thanks for yer help. Appreciated

Bear in mind that if the new employer offers him a role under TUPE and he rejects it, he is deemed to have resigned. Also, pensions are not covered under TUPE so if he were to transfer, he would need to review the pensions on offer