Fidante Benefits Package

Bonus Exchange

Bonus Exchange (sometimes known as Bonus Sacrifice) supports the Salary Exchange scheme. It is a highly tax efficient way to boost your retirement savings. Many of the previous notes on Salary Exchange equally apply.

What is Bonus Exchange and how does it work?

Bonus Exchange allows you to forgo some or all of your discretionary Bonus in return for an additional company Pension contribution.

When receiving a bonus in the conventional way through payroll, it is subject to income tax and National Insurance. What is paid into your bank is the net (after tax) amount.

As an example, a higher rate taxpayer receiving a £10,000 bonus will pay 40% in income tax and 2% in National Insurance on the value being paid. This will leave £5,800 as a net payment to their bank.

However, by exchanging part or all of a bonus for an additional employer Pension contribution, the amount being paid is not subject to income tax or personal National Insurance. Nor is Fidante subject to corporate National Insurance on the Pension contribution. Fidante have agreed to use the full saving (currently 13.8%) to uplift the Pension contribution payable as a result of Bonus Exchange.

Example

Using the example above, by exchanging the same £10,000 bonus for an additional Pension contribution, a total of £11,380 will be paid into the Pension arrangement. This equates to a 96% enhancement, compared to the net cash bonus.

What if I am not a higher rate taxpayer?

Keeping with the example above, a basic rate taxpayer would see the same £11,380 invested (equating to a 58% enhancement compared to the cash bonus) and an additional rate taxpayer (subject to 45% tax) would see a 96% difference.

Due to the way in which income tax thresholds are calculated, for those whose total income would otherwise fall between £100,000 and £125,140, the uplift in benefit can be as high as 199%.

How can I calculate my own contributions and savings?

A Bonus Exchange calculator is available on request. Please contact the Corporate Team at JMA (corporate@jmurray.co.uk ) Phone : 020 8642 3680 Please follow the simple instructions on the calculator to see the savings you can make.

How much can I contribute via Bonus Exchange?

You can exchange up to 100% of your Bonus. However, you must check that you are remaining within your overall annual Pension Contribution limits as set by HMRC. This Guide contains detailed information on the limits that apply

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