Pension Auto-Enrolment

rowco

There's a major omission in the main site's Auto-Enrolment article, which is that the minimum contribution under auto-enrolment is NOT actually 1% of gross earnings, it's 1% of gross earnings over £5824. This "Lower Earnings Threshold" is not mentioned anywhere on the guide, and for some people this could be a significant difference in contributions.

If you earn the minimum £10000 to be auto-enrolled, the minimum contribution is actually a measly 0.4%! This makes the 1% figure misleading for the very people who auto-enrolment is supposed to benefit.

This is included in the Money Advice Service's guide (sorry, I don't have enough reputation to post links) and accounted for in their calculator. They also assume that employee contributions will be calculated after this threshold, which is in fact what my employer did, leading me to scratch my head why they hadn't taken the amount I thought I'd asked them to.

The MAS also has a useful page titled "Automatic enrolment if you earn up to £10,000" If you earn over the £5824 threshold, your employer doesn't have to auto-enrol you, but they do have to contribute if you ask. Of course, at the current thresholds, they only have to pay fractions of 1%.

It would be great if the article could be amended to include these points, because I'm used to MSE being very good at mentioning gotchas like this.

LHW99

Patricia1066 - I don't think a SIPP can be used by an employer for autoenrollment. There is nothing to stop you having one, and the employer could choose to pay into it for you. But if the employer comes under the autoenrollment regulations then my understanding is they have to set up a scheme and you still have to be enrolled, and then you'd opt out.

lnesbitt

I have a question. I'm currently opted in to the pension through work, paying the minimum through payroll.

I also set up a separate direct debit to pay an additional amount each month.

Will I get the tax back on the top up I pay through my direct debit?
If not, would I get the tax back if I paid it through payroll?

LHW99

I think the tax should be reclained by the pension provider if you are making a payment from your after tax salary, but not if it comes out before tax through payroll.

quotememiserable

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