Company pension - NI loophole?

jules1969_2

:-/

There was a report on the Five Live breakfast show about ten days ago which mentioned that some large companies like Tesco have changed the way they pay company pension contributions to avoid national insurance for the employee, therefore saving them 11% on their contributions. I couldn't get my head around this - can anyone offer advice?

sly_dog_jonah

Try any of the links on google

King_David_2

I work for Sainsbury's, and they have also changed the way they deal with pensions.

The money the employee contributes is somehow deducted from your pay, on my pay slip anyhow, in the column where my pay is detailed. National insurance and PAYE show in the deductions column, but the pension contribution doesn't.

I expect that this loophole might just get plugged at some point.

Additionally, please post on the relevant board as this is for credit cards.

realaledrinker

Not a loophole, put a bona-fide tax saving device.

You agree to sacrifice part of your salary in return for the company contributing an equivalent amount to your pension scheme on your behalf.

Thus, for example, if you sacrifice 5% of your salary, tax deducted is the same (as pension contributions are before tax) but you pay NI on only 95% of your pre-sacrifice earnings.

You save someting like 10% of the pension contribution if you are a basic rate tax payer, 1% if you pay marginal tax at 40%

Things like bonuses, references to banks, etc, will be based on the notional 'gross' income.

Definitely worth buying into.