Going perm, MVL and salary sacrifice

[Lumiere]

Considering going permanent and closing my company via MVL route.

I have some savings in warchest and have never contributed to pension, would it be reasonable and most tax efficient to sacrifice maximum amount - £40.000 each year to pension and live on the reminder of the PAYE salary (basic rate taxable) + warchest, and then, if it goes on, proceedings from MVL.

It's been a while since I worked permanent, do I miss anything, what should I check before accepting an offer ?

e.g.
- company may not offer salary sacrifice - how common is it among medium-sized IT consultancies?
- may have some limits for salary sacrifice
- how does it work together with company matching employees pension, or that's a different scenario ?
- any other concerns ?

Thanks

[Amanensia]

That's not an unreasonable approach.

Bear in mind there will probably be a "normal" pension contribution - for example, the company might pay (making the numbers up here) 5% of pensionable salary into your pension scheme, and then up to another 5% in matching contributions. Also the amount that you sacrifice might be increased by the company to allow for the saving they are making in employer's NI contributions. This is fairly common.

It sounds like you haven't had a pension plan in place previously. This means that you can't use carry-forward, so you'll want to be careful that the total credited to your pension in a tax year, after allowing for the company contribution, any matching contribution, and any uplift for saved NI, does not exceed £40k. More than £40k can be put in, but the tax charge on the excess means you don't really want to.

On the other hand if you do have a pension plan in place - even if just a teeny legacy scheme from your last permanent employment yonks ago with £50 in old contracted out rebates in it - this restriction disappears and you can sacrifice as much as they'll let you. I don't know what's normal for IT but in Finance it's common for employers to let you sacrifice as much as you have headroom for.

[Lumiere]

It sounds like you haven't had a pension plan in place previously.

Thanks.

I do have a pension plan which I opened this March with £1, so should be able to use last year's allowance.

So if I understand it correctly I can sacrifice everything above basic rate threshold minus employers' top up amount (5% + 5% from your example) ?

Also, a silly question - is it something I should bring up to the payroll department on the first day in the office or how is it normally arranged ?

[Amanensia]

Once you've been offered the job I'd start asking questions like this. It's fully expected; if they aren't a tiny company they'll have plenty of people doing sacrifices (although probaby not as much as you want to do!) The size of your sacrifice might well raise eyebrows but as long as you're within your limits there's no real reason for them to decline. They'll be saving money via NI reductions (unless they rebate all of this to you - unlikely but possible.)

I'd ask to have a chat with someone senior in their HR department. They shouldn't be fazed by any of this. Worst case they might limit your sacrifice to a level where your total contribution comes out at £40k per year.

(I'm sure this doesn't apply but your residual salary after sacrifice must be at least minimum wage!)