Pension & NI Contributions

jimbo_the_jetset

My pension (NEST) payments come off my wages pre-tax.

Therefore my taxable pay is gross wage - personal allowance - pension payment. Happy with that.

Do this work the same with national insurance? i.e. are pension payments deducted before the national insurance is worked out?

Or is national insurance simply 12% of gross minus £7748 per annum (£149 per week) with no allowance for pension payments?

le_loup

NI is calculated on the gross wage.

nomunnofun

Also check if you, as a result of being a memebr of your pension scheme, are liable to pay contracted out NI contributions which, if you earn between £7755 and £40040, are levied at 10.4%, not 12%.

jimbo_the_jetset

Thanks, I though that was the case but just wanted to check.

You've now opened up another debate about contracting out..........back to some reading on the HMRC website

CLAPTON

contracting out is only possible for certain Final salary

nomunnofun

jimbo_the_jetset wrote: »

Thanks, I though that was the case but just wanted to check.

You've now opened up another debate about contracting out..........back to some reading on the HMRC website

Check your P60. If the letter beside your NIC contributions is 'D' you pay at the contracted out rate. If it is 'A', you don't. Or ask your employer which table letter they use.

nomunnofun

CLAPTON wrote: »

contracting out is only possible for certain Final salary

Well I have just broadened my knowledge by finding out what NEST was - never heard of it! It would seem that contracting out contributions is not appropriate here.

jimbo_the_jetset

Thanks.

I know that I am not contracted out at the moment so I pay at 12%. Was just looking into if I could or not or if it was worth it or not.

As CLAPTON says contracting out is only generally applicable to defined benefit pension schemes such as final salary. Although according to the Which? guide this will come to an end in 2016 when the state pension reforms kick in.

I believe the NEST scheme is a defined contribution scheme (% per month). From April 2012 anyone on this type of scheme has been automatically contracted back in (according to Which?).

So that's 2 things put to bed. Thanks.

jimbo_the_jetset

nomunnofun wrote: »

Well I have just broadened my knowledge by finding out what NEST was - never heard of it! It would seem that contracting out contributions is not appropriate here.

Yes, thankfully (for me) my employer was keen to start the scheme before they were obliged to do so. It has been a bit of a learning curve so far, seems to be performing quite well (although it has been a rising market in the last year).