Originally posted by pmeswani
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The LEL is the "Lower Earnings Limit". Currently this is the amount of earnings required for a years pension credit. The primary threshold is the value at which NI starts.
I don't know if the state second pension is based on earnings above the LEL or the PT. This could be important if you are trying to absolutely minimise tax/ni and maximise pension benefit. Untimately the difference between the LEL and the PT (15 pw) would cost you personally 11% and the company 12.8. However the paying of this would reduce the profit of the comapny and thus get a bit of CT relief -making the effective er ni contribuiton also in the order of 10.5%. Now as an individual if you don't have earned income for this you lose personal tax relief of 20% effectively on the 15 pw - but you may get the savings rate of 10% anyway.
I'd have to run the numbers through a tax calculator to work out the overall difference in liabilitys - at most it's a few quid either way. So the only question becomes do you get enough S2P as a result of the difference between 95 and 110 to make it worthwhile increasing salary to 110 pw. I suspect the answer is that you would need very specific circumstance for it to actually make any vialble difference. The S2P rules are far too complex for me to work out the nuances.
The important thing in my view is to ensure you have enough salary to get the years basic pension credit at nil cost - since it is a cost to buy it in voluntarily. There are some circumstance where it is worth buying though - in fact in most cases it's probably worth doing, especially if it gets you enough "old years" (since you need 10 to qualify for anything under the old system. Against the interaction of the old system and the new 30 year system is not entirely clear to me either). Thyen of course just to make sure everything is as clear as an opaque thing there is the sold called minimum income guarentee which is means tested. This can mean thatmodest savings or pension pots are in fact pointless anyway since under the current system pension will be topped up to the MIG if you don't have the money yourself (the MIG is a complete con in my vies - it effectively becomes a 100% tax rate for people of modest means in retirement).
Sorry, that's a bloody long woffly answer for a very short simple question of what does an acronym mean.
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