Tax relief & other questions for 17 year olds first company pension.

pensionpawn

My daughter is 17 and works part time (still in 6th form) for a major supermarket. She is able to join the pension scheme which includes a generous (by my company's level) employer contribution. What I am unsure about (even after reading the pension member documents) is the rules for 17 year old's. Although the documents do not mention a minimum age to join the scheme, are 17 year old's entitled to tax relief? Personally I see no reason why they should not enjoy the benefit of tax relief on contributions of up to £3600, regardless of employment status, or age? Any other issues for under 18s to be aware of?

Thanks.

xylophone

It would be possible for a day old infant to receive £720 tax relief after a pension contribution of £2880.....

With regard to the company pension, the tax relief will depend on whether the scheme uses net pay or relief at source.

http://www.thisismoney.co.uk/money/pensions/article-5622281/Low-paid-workers-denied-720-year-free-Government-pension-cash.html

Dox

It's likely to be a relief at source scheme. Even if she doesn't pay tax, the pension provider can still (re)claim basic rate tax and add it to her 'pot', so it is well worth doing.

pensionpawn

The pension scheme documentation states that below a certain salary level her contributions can not be made via salary sacrifice, to prevent impacting NI contributions / benefits. However as her pay is below the 'lower earnings level' of £116 a week I don't see what difference that makes. I'm just hoping that if she throws in, for example, £32 a week the pension administrator will do what is necessary to make it up to £40 / week, regardless of her age?

xylophone

What makes a difference is whether the pension scheme is set up on a net pay or relief at source basis.

https://www.gov.uk/workplace-pensions/managing-your-pension

Dox

pensionpawn wrote: »

The pension scheme documentation states that below a certain salary level her contributions can not be made via salary sacrifice, to prevent impacting NI contributions / benefits. However as her pay is below the 'lower earnings level' of £116 a week I don't see what difference that makes. I'm just hoping that if she throws in, for example, £32 a week the pension administrator will do what is necessary to make it up to £40 / week, regardless of her age?

Bit of a red herring. The reason salary sacrifice can't be used for low earners is that going this route would reduce their pay below National Minimum Wage.

What's the pension scheme she's thinking of joining?

pensionpawn

Sainsbury's Step Up.

xylophone

https://www80.landg.com/DocumentLibraryWeb/Document?reference=sainsburys_rsp_member_booklet.pdf

As far as I can see, in this scheme, if the Smart option is taken, then net pay will also operate.

Page 3


You give up part of your
salary in exchange for a
contribution to your pension pot.
Your employer will also start
paying in their contributions.
Step 3: Your contribution is
taken from your pay before tax,
so you benefit from tax relief
straight away, and you save on
National Insurance too

If the smart option is not taken, then RAS can operate. Page 8

You can pay money in by having your contributions:
paid through SMART (also known as salary sacrifice)
taken from your pay after tax and National Insurance
deductions.
Your employer will automatically include you in
SMART, unless:
you earn less than the pay protection limit, or
you would prefer to have your contributions taken from
your pay.
If you earn less than the pay protection limit
SMART may not be appropriate for everyone. You won't
be included in SMART if you earn less than the pay
protection limit because it wouldn't be to your financial
advantage. Instead, your contributions to the Plan will be
deducted from your pay.

It seems she will earn too little to pay either tax or NI but if RAS is used then she will receive tax relief on her contributions.

She is too young and earns too little to qualify for automatic enrolment but she can (page 6) ask to join the plan.

She can check with HR.