Company stakeholder pension

david78

Can someone confirm that I am correct in thinking something is wrong here:

My partner's is currently paying a modest monthly amount into a company sponsered stakeholder plan. Deductions are taken from her pay. The pay slips clearly show that the company are calculating taxable earnings as Salary minus Pension contributions (they also make a contribution which is separate). So I think Gross contributions are being made into the plan.

Now looking her pension statement it is clear the pension provider is treating each payment as a net payment because they are also crediting the account with monthly tax relief amounts.

Anyone confirm? I think the company have screwed up with their payroll administration.

YorkshireBoy

I'm not a pensions expert, and I've only had a company stakeholder pension for the last 18 months (21 years in a final salary scheme before this) but what you describe is NOT how my contributions are made.

My contributions definitely come off my net pay after tax, and the pension provider (Scottish Life in my case) adds in the relief to my NET contributions.

Your partner seems to be getting twice the relief they are entitled to. The system WILL catch up with this, sooner or later, and I'm sure the outcome will not be pleasant!

I would check the scheme details booklet again and, if you're still sure what you describe is correct, I would WRITE to your employer asking them to resolve the issue.

I'm not sure if I would contact the provider just yet. Maybe best to see what the employer says first.

HTH
YB

Debt_Free_Chick

If this is definitely a stakeholder plan then, yes, the deductions are wrong. As Yorkshire Boy says, deductions should be from net pay, after tax is calculated.

However, if this is an occupational defined contribution scheme, then the deductions are correct. With an occupational scheme, you get the tax relief in your pay packet.

Double check which type of scheme it is and then alert the payroll department. There could be a bit of a mess that needs sorting out and your partner may find that she owes some tax! If so, it will likely be deducted from her pay and that could be painful.

HTH

david78

Thanks for the confirmation. Its definitely a stakeholder and so definitely wrong. There won't be too much tax to pay as it's only just started.

muckell

Does sound like it is being deducted wrong from your payroll dept. Stakeholders and pension plans are normally deducted net whereas schemes are normally gross.

Another thing that might be worth looking at is if you are paying national insurance A or D. NI (A) is usually charge for a plan whereas (D) is scheme

dunstonh

pension contributions into a stakeholder from an employer/pay slip should be gross even if it is an individual stakeholder/PPP which the employer is paying into.

isasmurf

I disagree with you on that one dunstonh and agree with previous posters. ALL stakeholder/personal/group personal pension contributions whether bought by the individual or provided through the employer are paid from net pay.

Stakeholder Pension scheme managers reclaim basic rate tax relief on all contributions they receive, so if contributions were being paid from gross pay, then you'd be getting tax relief twice.

dunstonh

I have set up a number of contributions from the employer and if the employer says, for example, £70 to be contributed then the employer pays the £70 and £70 goes into the pension. There is no increase due to the tax relief.

edit: Just read thread again and spotted my error. I was referring to employer contributions as I misread the information. I was not referring to employee contributions through payroll.

However, i point you to http://www.inlandrevenue.gov.uk/pensionschemes/faqs/contoccs.htm#i which confirms the information relating to employee contributions.

david78

Thanks to all for the comfirmation. A letter is on its way to the pay department to tell them to put right their error.

Thank you dunstonh for the IR link.