Calculate backdated pension contributions

w00519772

Say my gross salary was 3,000 for the last 18 months. Say I wanted to backdate pension contributions (3%) for 18 months. Here is how I have worked out how much I must pay:

Monthly contribution: (3/100) * 3000 = 90
Total back payment: 90*18=1620
Subtract Income tax and National Insurance (20%+6%): 1620-((26/100)*1620)=1198

Therefore I would have to pay £1,198 for my pension plan to increase by: £1,620. Is that correct?

Can I pay this as one lump sum or is there a limit on what you can contribute?

Also does the employer receive NI and income tax relief on their pension contributions?

I am part of a salary sacrifice scheme for pension contributions.

jamesd

Your employer would save their employer NI, which is normally 13.8% in the typical income ranges involved in salary sacrifice. It's quite common for employers to contribute some of this saving into the pension pot of the employee..

bigadaj

But you can't contribute to a pension for the last tax year, only the current one.

w00519772

bigadaj wrote: »

But you can't contribute to a pension for the last tax year, only the current one.

This website says that you can backdate for four years: https://www.citizensadvice.org.uk/tax/what-is-taxable-income/tax-reliefs/.

kidmugsy

You can't carry back contributions. You can carry forward annual allowances. I think you'll need to tell us what you mean by "backdate": what is your purpose?

bigadaj

w00519772 wrote: »

This website says that you can backdate for four years: https://www.citizensadvice.org.uk/tax/what-is-taxable-income/tax-reliefs/.

As kidMugsy says you can carry forward the allowance, but this is only useful if you earn in excess of £40k and so have used the whole of your current years allowance.

In this case the sum involved is only £3k which suggests the current years allowance hasn't been used, yotal salary appears to be low thirties?

I'm not aware of many companies allowing salary sacrifice to be taken retrospectively in any case, is there any reason these have to be retrospective as they seem to fit within the current years tax allowance?

You could, schedule these immediately or increased contributions for this year, you'd need to check with your specific employer and scheme rules.

NI is also 12% for standard rate taxpayers so the actual saving on pension money is 32% for standard rate as opposed to 42% for higher rate.

w00519772

My company made an administration error meaning their contributions were incorrect for about 18 months I.e. The contributions were too low. My contributions were also too low.

I owe about 900 and my company owes about 2.5k for the last eighteen months. I am hoping that they can be paid as a lump sum this month. That is what I mean by "backdate".

bigadaj

w00519772 wrote: »

My company made an administration error meaning their contributions were incorrect for about 18 months I.e. The contributions were too low. My contributions were also too low.

I owe about 900 and my company owes about 2.5k for the last eighteen months. I am hoping that they can be paid as a lump sum this month. That is what I mean by "backdate".

Probably unlikely that Hhmrc would allow this retrospectively but so long as you are within the annual limits then this can be done now for this year.

They probably need to Analyse the funds this would have been invested in and determine how much has been lost in terms of performance and make good that loss as well.

w00519772

bigadaj wrote: »

Probably unlikely that Hhmrc would allow this retrospectively but so long as you are within the annual limits then this can be done now for this year.

They probably need to Analyse the funds this would have been invested in and determine how much has been lost in terms of performance and make good that loss as well.

Why do you assume there is a loss? I have analysed the funds that I invested in over the last eighteen months and they have increased by 3.78%. The funds I have invested I have not changed in eighteen months.

bigadaj

w00519772 wrote: »

Why do you assume there is a loss? I have analysed the funds that I invested in over the last eighteen months and they have increased by 3.78%. The funds I have invested I have not changed in eighteen months.

There is a loss to you in the money not being invested, if that is the case then the employer should make good that shortfall in your pension fund.

jamesd

w00519772 wrote: »

This website says that you can backdate for four years: https://www.citizensadvice.org.uk/tax/what-is-taxable-income/tax-reliefs/.

What the web site really says is that your claims can be backdated for up to four years. That is, from the event that caused you to be entitled to the relief, you have up to four years to claim the relief.