Employer Contributions

wotsthat

Hi

My employer is a small family business and doesn't make any contributions to my pension - I want to persuade them to do so.

If, and it's a big if, they made contributions to my private scheme what's in it for them? Are there any NI or tax savings or anything else?

Thanks

Debt_Free_Chick

Yes - no NI payable on amounts they pay to your pension and the contribution qualifies as a tax deductible expense.

However, these savings just reduce the cost. The net cost, after these savings, is still an extra expense for the business

samsara

Is there any limit to the amount a company can contribute to an employee pension? And do company contributions have to be matched by the employee contributions?

Any advice appreciated

Thanks

Pal

At the moment there are some limits on the amount an employer can contribute, but from 6 April those limits will no longer apply. Boradly the limits on total contributions (your and theirs) will be 100% of your earnings or £215,000 p.a.

While I am sure you want your employer to contribute, it is basically still a payrise you are asking for. Assuming that is not possible, you could always ask for a pay cut (!) of, say, 10% and ask them to contribute that amount directly to your pension, adding on the national insurance contributions that they will be saving (12.8% of your 10%). It isn't much, but it is basically something for nothing.

Once you have something in place, you can start badgering them in future years to up the contribution rate that they pay. From small acorns....

Milarky

Pal wrote:

Assuming that is not possible, you could always ask for a pay cut (!) of, say, 10% and ask them to contribute that amount directly to your pension, adding on the national insurance contributions that they will be saving (12.8% of your 10%). It isn't much, but it is basically something for nothing.

But is IS significant. It basically doubles the tax relief on ordinary pension contributions for most people (from 22%). Big companies do it - It's called 'salary sacrifice'.

EdInvestor

Do be aware though that salary sacrifice can reduce your income for mortgage purposes and also affect your entitlement to state pensions.

Pal

Milarky wrote:

But is IS significant. It basically doubles the tax relief on ordinary pension contributions for most people (from 22%). Big companies do it - It's called 'salary sacrifice'.

Yes, but that is just playing with numbers. In reality if the individual was sacrificing 10% of their salary in return for a 10% company contribution plus the NICs, then the company is only "contributing" 1.28% of their salary towards the pension, and that is only the tax saving - they are not actually paying anything extra. Better than a poke in the eye, but not going to set someone's pension fund alight.

However, it is a starting point for future negotiation...