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  • FIRST POST
    • stoozie1
    • By stoozie1 5th Dec 17, 5:35 AM
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    stoozie1
    How would someone on minimum wage be able to make their pension contribution?
    • #1
    • 5th Dec 17, 5:35 AM
    How would someone on minimum wage be able to make their pension contribution? 5th Dec 17 at 5:35 AM
    I have read on the .gov site that after a company's staging date, any employee earning 10k annually must be enrolled and must contribute.

    However, salary sacrifice can't take someone's cash pay below minimum wage. How is this possible and how will those on NMW be able to contribute?
Page 1
    • Novice investor101
    • By Novice investor101 5th Dec 17, 7:39 AM
    • 63 Posts
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    Novice investor101
    • #2
    • 5th Dec 17, 7:39 AM
    • #2
    • 5th Dec 17, 7:39 AM
    Their payment will be taken from their gross pay (after tax & NI) & when paid into the pension will have the tax added back on, but not the NI.
    • Novice investor101
    • By Novice investor101 5th Dec 17, 7:41 AM
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    Novice investor101
    • #3
    • 5th Dec 17, 7:41 AM
    • #3
    • 5th Dec 17, 7:41 AM
    Also, gov rules don't state that the employee must join. It states the employer must enrol them. The employee is then free to decide if they want to stay opted in to the pension and contribute or if they want to opt out & not contribute.
    • HappyHarry
    • By HappyHarry 5th Dec 17, 7:50 AM
    • 455 Posts
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    HappyHarry
    • #4
    • 5th Dec 17, 7:50 AM
    • #4
    • 5th Dec 17, 7:50 AM
    I have read on the .gov site that after a company's staging date, any employee earning 10k annually must be enrolled and must contribute.

    However, salary sacrifice can't take someone's cash pay below minimum wage. How is this possible and how will those on NMW be able to contribute?
    Originally posted by stoozie1
    Anyone on NMW canít be asked to contribute to their pension scheme via salary sacrifice, else, as you rightly say, they would be paid below the NMW. This is because salary sacrifice reduces the gross pay of an employee.

    However, pension contributions can be taken from net pay. This tends to be better lower paid individuals as they then get tax relief added to their pension that they might not have received under the salary sacrifice method.

    So to answer your question, salary sacrifice can not be used, but taking pension contributions from net pay can be.
    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
    • zagfles
    • By zagfles 5th Dec 17, 8:04 AM
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    zagfles
    • #5
    • 5th Dec 17, 8:04 AM
    • #5
    • 5th Dec 17, 8:04 AM
    By not using sal sac! Sal sac is basically a legal fiddle to save NI, it's not (or never was) the normal way to take employee pension contributions.

    The "normal" was to take employee pension conts is before tax but after NI (what HMRC confusingly refer to as "net pay"). So you get tax relief in your payslip but not NI relief.

    The other way is using a RAS (relief at source) scheme, which operates like a personal pension. Pension conts are taken out after tax and NI, and the pension provider claims basic rate relief. This is better if salary goes below the personal allowance as you get tax relief even though you don't pay tax - neither sal sac or "net pay" will get you tax relief below the PA.
    • stoozie1
    • By stoozie1 5th Dec 17, 3:52 PM
    • 393 Posts
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    stoozie1
    • #6
    • 5th Dec 17, 3:52 PM
    • #6
    • 5th Dec 17, 3:52 PM
    Many thanks all.
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