Out of the ordinary raise offer?

LegacyUser

My workplace of about 100 employees had an annual salary review last month. I was brought in to the meeting room and discussed my performance with my manager and one of the directors. They said they were very happy with how I was getting on and offered me a 5% increase in salary, but with one catch.

Part of my increase took the form of an employers contribution to a pension scheme. So in reality, I only received roughly 2.5% of an additional income with the rest going into a pension scheme.

They did also say that there was no obligation to go into the pension scheme and I could take it as increase in gross salary instead, but I was strongly advised to take the pension.

I'm not too familiar with these schemes and how they are normally provided in companies, but is this normal? I found it strange that I was given an "either or" option.

Lux23

You might do better tax-wise if you put the 2.5% into a pension - how old are you?

livedadream

IMO always go for the pension option....

Stationmaster

Is your employer matching what you put in? If so it would likely be very worthwhile for you.

Doop

Do most employers not offer to match what you put into the pension ie around 2.5%?
Id be suspicious of this deal tbh. Personally Id' take the pay rise and tell them you might think about joining the pension scheme over the next few months. A pension scheme can be joined at any point in the year....

jimmycrackcorm

They are doing you a favour. It's the same as you choosing to pay an AVC.

Just check though that it is called as that and not a company contribution if you are in the job less than two years. Most company pensions contributions are not available if you leave your job before two years are up.

ibarelycare

Stationmaster wrote: »

Is your employer matching what you put in? If so it would likely be very worthwhile for you.

Doop wrote: »

Do most employers not offer to match what you put into the pension ie around 2.5%?
Id be suspicious of this deal tbh. Personally Id' take the pay rise and tell them you might think about joining the pension scheme over the next few months. A pension scheme can be joined at any point in the year....

OP said it was an employer's contribution.


OP I'd definitely take the pension contribution. It's tax free.

bmwguy

Take the pension. It's not a scam or a catch it's a tax efficient way for the employer to pay you and a tax efficient way for you to be paid. My generation (30s) and below are in for a big shock by not paying into a pension scheme. Less than half do it voluntarily (private sector)

exaisle

jimmycrackcorm wrote: »

They are doing you a favour. It's the same as you choosing to pay an AVC.

Just check though that it is called as that and not a company contribution if you are in the job less than two years. Most company pensions contributions are not available if you leave your job before two years are up.

They're not doing you any favour as such. By paying into the company pension, they're saving themselves the employer's portion of PRSI which is currently 10.75%.

wally1990

ibarelycare wrote: »

OP said it was an employer's contribution.


OP I'd definitely take the pension contribution. It's tax free.

It works out more than 2.5% (from what your Said) because the value of the other 2.5% contribution is reducing your tax liability from paye USC prsi and rates so it's actually more beneficially and future saving/planning


Defo go with the pension option

Otherwise your grossing the full 5% and it is taxable income where you can increase gross by 2.5% get taxed on that

Offset the 2.5% to pension, reduce tax liability there and save for future

If beneficially to both parties (not a scam) just tax efficient

You can always ask the payroll dept to do an estimated payslip with both options too for a comparison but I'd recommend the pension option in the long term/run here

ibarelycare

exaisle wrote: »

They're not doing you any favour as such. By paying into the company pension, they're saving themselves the employer's portion of PRSI which is currently 10.75%.

Yeah they're saving money for themselves but they're also saving the employee nearly 50% on that 2.5% increase (provided they're on the higher level of tax)

wally1990

ibarelycare wrote: »

Yeah they're saving money for themselves but they're also saving the employee nearly 50% on that 2.5% increase (provided they're on the higher level of tax)

Exactly ( don't listen to people saying 'it's a scam'

Just tax efficient for both of ye (bear in mind it's a pay rise of 100 staff and 10.75% employers Prsi is no joke when running a business ) id be happy with the options

TimeToShine

bmwguy wrote: »

Take the pension. It's not a scam or a catch it's a tax efficient way for the employer to pay you and a tax efficient way for you to be paid. My generation (30s) and below are in for a big shock by not paying into a pension scheme. Less than half do it voluntarily (private sector)

Why would you though? Our generation will be working until 70+, we won't have 5+ of our twilight years like they do today to fund. That extra time working will undoubtedly pay for anything you want to do after.

If anything, you're mad not to spend now while you're young, fit and able. You never know what's down the road!

exaisle

wally1990 wrote: »

Otherwise your grossing the full 5% and it is taxable income where you can increase gross by 2.5% get taxed on that

If the OP puts his 2.5% into the company pension scheme (as an AVC) then he gets tax relief on that (but pays USC). He might be better advised to ask his employers to pay the entire amount into the pension as an employer's contribution...then he avoids USC (spit spit cough..even the mention of it makes me retch)

ibarelycare

exaisle wrote: »

If the OP puts his 2.5% into the company pension scheme (as an AVC) then he gets tax relief on that (but pays USC). He might be better advised to ask his employers to pay the entire amount into the pension as an employer's contribution...then he avoids USC (spit spit cough..even the mention of it makes me retch)

My understanding from the OP is that it is an employer contribution

LegacyUser

Op

You need to make sure there is no claw back from the company if you leave within the next 2 years.

caviardreams

Also, if you are looking for a mortgage any time soon, bear in mind that it is based on a multiple of your salary, so if you take the 2.5% as salary it will mean you can borrow more (in theory anyway!)

TimeToShine

TimeToShine wrote: »

Why would you though? Our generation will be working until 70+, we won't have 5+ of our twilight years like they do today to fund. That extra time working will undoubtedly pay for anything you want to do after.

If anything, you're mad not to spend now while you're young, fit and able. You never know what's down the road!

We might be 70 before we get state pension but not all of us will work until then.

Cloudio9

Augeo wrote: »

We might be 70 before we get state pension but not all of us will work until then.

Yup. Most people are effectively unemployable in their 50's even if they are keen to work

evolving_doors

How guaranteed are you, if the company goes under is your pension locked in for the next 40 or so years!

Depends how much that 2.5% is worth to you after tax now (only you can answer that). If it's just a couple of hundred and the pensions scheme is watertight then throw it in and forget about it, hopefully it'll beat inflation at the other end!

AndrewJRenko

Cloudio9 wrote: »

Yup. Most people are effectively unemployable in their 50's even if they are keen to work

Really? So all those people running our banks, our large manufacturers, our large distribution companies, our large civil service departments and our large semi-state services are effectively unemployable?

All those mature bar men and waiting staff, all those experienced tourist guides, all those doctors and nurses at the tops of their games are effectively unemployable?

evolving_doors

AndrewJRenko wrote: »

Really? So all those people running our banks, our large manufacturers, our large distribution companies, our large civil service departments and our large semi-state services are effectively unemployable?

That's not most people though!

AndrewJRenko wrote: »

All those mature bar men and waiting staff,

Don't see very many of those TBH...

AndrewJRenko wrote: »

all those experienced tourist guides, all those doctors and nurses at the tops of their games are effectively unemployable?

Depends on what the op's job is but I doubt it's a doctor or nurse. Their positions are fairly secure throughout their career in the public sector!

TimeToShine

Cloudio9 wrote: »

Yup. Most people are effectively unemployable in their 50's even if they are keen to work

Not really applicable. Anyone in a position to be offered a company pension scheme will most certainly be highly employable if not in the prime of their career at that age.

rgossip30

Augeo wrote: »

We might be 70 before we get state pension but not all of us will work until then.

http://www.independent.ie/business/personal-finance/prepare-to-work-until-you-are-70-rise-in-age-for-the-state-pension-on-cards-35930630.html

A big possibility .At 69 you must be actively seeking work .:D
How come in the 80's there was 14% unemployment,no housing shortage,emigration and minimal immigration . A pension time bomb was never mentioned . EU workers can bring their elderly parents to claim a non contributory pension . They should stop the abuse and tighten the rules instead of penalising workers .
Civil and public servants are encouraged to retire early with bonus payments and an automatic pension for life . The notion has become popular that machines and robots will do the work .



For those who say it was the baby boom ?

https://www.irishtimes.com/news/ireland/irish-news/baby-boom-puts-ireland-top-of-eu-birth-rate-table-1.3150045

Interested Observer

TimeToShine wrote: »

Why would you though? Our generation will be working until 70+, we won't have 5+ of our twilight years like they do today to fund. That extra time working will undoubtedly pay for anything you want to do after.

If anything, you're mad not to spend now while you're young, fit and able. You never know what's down the road!

Because compound interest. Because it's extremely tax efficient. Because in a lot of cases employers will match your contributions. I put €150pm into my pension which my employer match. I could take home an extra €75 after tax or I could add €300 to my pension each month. It's a complete no brainer. You're mad if you can afford to pay into a pension but decide not to.

AndrewJRenko

rgossip30 wrote: »

Civil and public servants are encouraged to retire early with bonus payments and an automatic pension for life .

The 'bonus payment' for civil and public servants was simply the chance to get the pension that applied to their actual salary before the Government did what would be illegal for any other employer to do and unilaterally cut the salary for all staff.

http://www.thejournal.ie/croke-park-2-pension-deal-815322-Mar2013/

The 'automatic pension for life' is simply the contracted pension that the staff member was due.

rgossip30

AndrewJRenko wrote: »

The 'bonus payment' for civil and public servants was simply the chance to get the pension that applied to their actual salary before the Government did what would be illegal for any other employer to do and unilaterally cut the salary for all staff.

http://www.thejournal.ie/croke-park-2-pension-deal-815322-Mar2013/

The 'automatic pension for life' is simply the contracted pension that the staff member was due.

So for civil and public servants is acceptable to retire early but not the private sector. They need to continue to pay taxes for those pensions .

AndrewJRenko

rgossip30 wrote: »

So for civil and public servants is acceptable to retire early but not the private sector. They need to continue to pay taxes for those pensions .

Lots of people retire early, both public sector and private sector. And lots of those early retirees continue to work, though probably in different roles. The early retirement is sometimes a bit of a tax scam to get access to tax free money in pension funds before normal retirement age.

looksee

AndrewJRenko wrote: »

Really? So all those people running our banks, our large manufacturers, our large distribution companies, our large civil service departments and our large semi-state services are effectively unemployable?

All those mature bar men and waiting staff, all those experienced tourist guides, all those doctors and nurses at the tops of their games are effectively unemployable?

It might have been better to say 'most unemployed people' - if you lose your job in your 50s it is very hard to get another one, whereas people in employment in their 50s are most likely going to continue to retirement unless there are issues with redundancy or a company closure.

AndrewJRenko

looksee wrote: »

It might have been better to say 'most unemployed people' - if you lose your job in your 50s it is very hard to get another one, whereas people in employment in their 50s are most likely going to continue to retirement unless there are issues with redundancy or a company closure.

It's true to say that it is very hard to recover from redundancy or closure at that age. I have seen people reinvent themselves and discover other careers, through probably with reduced earnings - bank manager to small builder/handyman, bank manager to school tea lady, purchasing manager to security guard and the old standard fallback of taximan is available too, though it is hard to make a living there.

rgossip30

AndrewJRenko wrote: »

It's true to say that it is very hard to recover from redundancy or closure at that age. I have seen people reinvent themselves and discover other careers, through probably with reduced earnings - bank manager to small builder/handyman, bank manager to school tea lady, purchasing manager to security guard and the old standard fallback of taximan is available too, though it is hard to make a living there.

The Back to Work Enterprise Allowance helps with the taxi job . Over 55 years its hard to get this allowance .