How would someone on minimum wage be able to make their pension contribution?

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stoozie1stoozie1 Forumite
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I have read on the .gov site that after a company's staging date, any employee earning 10k annually must be enrolled and must contribute.

However, salary sacrifice can't take someone's cash pay below minimum wage. How is this possible and how will those on NMW be able to contribute?
Save 12 k in 2018 challenge member #79
Target 2018: 24k Jan 2018- £560 April £2670

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  • Novice_investor101Novice_investor101 Forumite
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    Their payment will be taken from their gross pay (after tax & NI) & when paid into the pension will have the tax added back on, but not the NI.
  • Novice_investor101Novice_investor101 Forumite
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    Also, gov rules don't state that the employee must join. It states the employer must enrol them. The employee is then free to decide if they want to stay opted in to the pension and contribute or if they want to opt out & not contribute.
  • HappyHarryHappyHarry Forumite
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    stoozie1 wrote: »
    I have read on the .gov site that after a company's staging date, any employee earning 10k annually must be enrolled and must contribute.

    However, salary sacrifice can't take someone's cash pay below minimum wage. How is this possible and how will those on NMW be able to contribute?

    Anyone on NMW can’t be asked to contribute to their pension scheme via salary sacrifice, else, as you rightly say, they would be paid below the NMW. This is because salary sacrifice reduces the gross pay of an employee.

    However, pension contributions can be taken from net pay. This tends to be better lower paid individuals as they then get tax relief added to their pension that they might not have received under the salary sacrifice method.

    So to answer your question, salary sacrifice can not be used, but taking pension contributions from net pay can be.
    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
  • zagfleszagfles Forumite
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    By not using sal sac! Sal sac is basically a legal fiddle to save NI, it's not (or never was) the normal way to take employee pension contributions.

    The "normal" was to take employee pension conts is before tax but after NI (what HMRC confusingly refer to as "net pay"). So you get tax relief in your payslip but not NI relief.

    The other way is using a RAS (relief at source) scheme, which operates like a personal pension. Pension conts are taken out after tax and NI, and the pension provider claims basic rate relief. This is better if salary goes below the personal allowance as you get tax relief even though you don't pay tax - neither sal sac or "net pay" will get you tax relief below the PA.
  • stoozie1stoozie1 Forumite
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    Many thanks all.
    Save 12 k in 2018 challenge member #79
    Target 2018: 24k Jan 2018- £560 April £2670
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