NOW Pensions: bad news? Stay away?

mania112

You have to be slightly careful with salary sacrifice for auto-enrolment. The rules allow the company to pay their minimum on the amount of your pay after you've sacrificed your salary for your own contributions.

Does your pay slip show the employer contribution, or do you have those figures online?

To be clear: once you receive your payslip this doesn't mean that all the money has been paid out. Firstly a calculation is made to see who is owed what. This produces the payslips (normally), then you're paid, then HMRC are paid and then the pension contributions are made. Of course, this could all happen in one day, but more often than not it doesn't and from start to finish it could take a few weeks.

Not_Me_Officer

This is lost on me to be honest.

So there is no 0.2% from the government after all then. I'm taking that 0.2% home in my pay?

Is this still 'worth it'? I know that's a very open question. I thought anything your employer was paying in to also = free money = good idea?

Is that not the case here (this being a good idea)?

greenglide

You pay .80p, tax relief of 20p is given by the government and £1.00 is paid it no your pension scheme.

Employer would pay £1.00, no tax relief for them.

The free money is the 20p tax relief on your contribution and the £1.00 that the employer pays. You pay .80p, your pension fund gets £2.00.

Not_Me_Officer

To answer mania which I didn't see yesterday - no my payslip doesn't show employer contributions.

So what is this salary sacrifice thing then? We were never told anything about this. Is it an option you can choose to take or can you just be made to take it as part of this scheme?

And here was me thinking it'd be all straight forward & easy to understand

greenglide

So what is this salary sacrifice thing then?

Salary sacrifice is an agreement between your employer and yourself to reduce your salary in exchange for the employer paying an equivalent sum of money into your pension fund. This avoids employee and employers NI contributions.

It is generally a "good thing" and saves you money. You employer would have told you if it is a salary sacrifice scheme, you would have to agree to it.

Not_Me_Officer

Ah right. Thanks. Then in that case it isn't salary sacrifice as i'd not been told. I'd only seen it mentioned in this thread to be honest.

mania112

I've just looked on the NOW website, and I don't want to add more confusion, but I suspect you're contributing on the NET PAY basis, which is similar to, but not the same as. Salary Sacrifice.

I did doubt salary sacrifice when you said your statement shows an employee contribution, which wouldn't be the case for salary sacrifice, it all goes in as employer.

Let's not complicate things though - we're trying to find out where you contributions have gone. But suffice to say - when you contribute to a pension you do get a tax-break, it just materialises in different ways depending on the method of contribution.

Not_Me_Officer

Is there some sort of calculator where I can enter my gross pay & it'll tell you what you should be paying in, what your employer should be paying in & if the calculator is advanced enough - what any of your voluntary contributions would be based on the % you select?

Not_Me_Officer

Well I've just used this calculator: https://www.moneyadviceservice.org.uk/en/tools/workplace-pension-contribution-calculator


I took the month I paid in £10.81.


I earned £1,567.46 gross that month


According to that calculator, my employer should pay in £10.82 based on a 1% contribution.


I should pay in £8.65 on a 1% contribution


And £2.16 should go in as tax relief.


£2.16 + £8.65 = £10.81 ... the amount that I personally paid in.

Not_Me_Officer

Oh & there was a bit in my online portal not about salary sacrifice but salary exchange. I assume it's the same thing.
There's a box to tick & mine is unticked.

Salary Exchange




By contributing via salary exchange, you are agreeing to reduce your salary by the amount equivalent to your pension contribution. Therefore, you will not have to pay National Insurance or Tax on your contribution, leaving you with the same money in your pension fund but a bit more in your take-home pay. If you choose to contribute without Salary Exchange, the contribution will be subject to National Insurance deductions.
Salary Exchange may not be the right thing for everyone, as it can affect your entitlement to state benefits. If you are not sure then you should seek advice from HR.