Minimum employee contribution

HandyMandy

Hi, if an employer contributes 4%, to the company group pension scheme, which has been in place many years, what is the minimum an employee must contribute? Is it 4% to bring the total contributions to 8% or does the employee now need to contribute 5%?

Many thanks.

bowlhead99

The total must be at least 8.

If the company puts in 5 (as my employer does), the employee only needs 3 for the scheme to meet the requirements of the law, because it would be 8 in total. If the company puts in 4, the employee only needs to put in 4 for the scheme to qualify as having 8% in total. If the company puts in 3 (the minimum the law requires them to put in), the employee would need to be putting in 5 for the scheme to qualify as having 8% in total.

The reference to employee putting in 5 is if the employer only puts in 3 and the scheme needs to get to 8 total.

HandyMandy

Thanks for your reply, that’s what I thought but just wanted to doublecheck.

Cheers.

JoeCrystal

HandyMandy wrote: »

Thanks for your reply, that’s what I thought but just wanted to doublecheck.

Cheers.

It is worth double checking that it is 4% before taxes and not 4% after taxes. If it is after taxes, then you are contributing 5% with 1% reclaimed by your pension provider from HMRC.

bowlhead99

JoeCrystal wrote: »

It is worth double checking that it is 4% before taxes and not 4% after taxes. If it is after taxes, then you are contributing 5% with 1% reclaimed by your pension provider from HMRC.

It seems pretty rare that an employer would describe a scheme as having a 4% of salary contribution by the employee and mean that the employee was putting 5% of their salary into the pension.

If they say the scheme is putting x% of your pensionable pay into your pension then the portion of your net pay that you actually give up may perhaps be y%, but the gross pension benefit you end up with for your retirement is the one you would want to market to the staff as a selling point of the job.

It's like if I ask my boss for a pay rise as a result of my hard work or a promotion, he would usually tell me the gross change in my wage or salary, not the amount of net pay I get after tax and NI.

Paul_Herring

My company contributes 4% (has done for a while) and until April employees were required to contribute (IIRC) 2% - the change in April required employees not already contributing at least 4% to increase it to 4% (we're salary sacrifice.)

nancmat

Hi my company pay in 5% and employee 3% based on salary as it meets 8% is this sufficient even though its based on basic? Thanks

Paul_Herring

nancmat wrote: »

Hi my company pay in 5% and employee 3% based on salary as it meets 8% is this sufficient even though its based on basic? Thanks

8% of basic salary on anything between £6,136 and £50,000 is the absolute minimum. Bonuses and overtime should be included.

https://www.nestpensions.org.uk/schemeweb/helpcentre/contributions/calculating-contributions/calculate-contributions-using-qualifying-earnings.html

Some companies my start from £0, rather than £6K, but it's not required.

nancmat

Thanks, at present they don't inc bonus or overtime and just do it on basic. But they can't agree on the 9% as it's basic paid. See the set one option...

https://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/automatic-enrolment/how-much-do-i-and-my-employer-have-to-pay

eastcorkram

My employer contributions have just gone to 5%, from 3.
My contribution is 25%. Both of these are on basic pay only. I earn about £100 to £150 a week in overtime, and this does not alter the pension paid.
Paid weekly, and using salary sacrifice.