Government Contributions

bottleandahalf

Hi folks
I have recently started contributing more to my workplace pension.
I have contributed £400 of my pay, and my employer pays £90.

When does the government contribution be added as it isn't showing on my pension transactions?

I was under the impression if I contributed £400, the government tops this up by £100 and my employer tops up £90.

SonOf

When does the government contribution be added as it isn't showing on my pension transactions?

If it is a provider that pre-funds the tax relief, then the tax relief is immediate.
If it is a provider that waits until they get the tax relief back from HMRC then it is about 6 weeks (give or take depending on when in the month your contribution is as there is a monthly deadline date to request it. If your contribution is after that date, it can take a few weeks more).

I was under the impression if I contributed £400, the government tops this up by £100 and my employer tops up £90.

If your net contribution is £400 then your gross contribution after tax relief is £500. The employer contribution remains £90. Making £590

molerat

Are you contributing from gross or net pay ?

bottleandahalf

I'm contributing from gross pay.
I can't see any HMRC contributions on any of the transactions since January. (L and G)

Linton

Whether you get an explicit HMRC contribution depends on the way your employer calculates tax. Withe a personal pension you contribute with taxed money. You are therefore due a tax refund, which for basic rate tax HMRC pay directly into your pension. This is termed "Relief at source" . Many companies operate what is termed a "net pay" arrangement whereby your pension is deducted from your gross pay before the calculation of tax. You are never taxed on the money in the first place and so are not due a refund. For most people the results will be the same. It should be clear from your pay slip whether the pension is deducted before or after tax.


The names used for the 2 ways of managing pensions seem the wrong way round to me but they are what they are.



If your employer does have a relief at source arrangement the HMRC tax refund should turn up in a few weeks.

bottleandahalf

My payslip shows L and G -400.00.

Then Er. Pens. Conts 490.00

Linton

bottleandahalf wrote: »

My payslip shows L and G -400.00.

Then Er. Pens. Conts 490.00

This seems to treat your £400 as part of the employer contribution. Is this a Salary Sacrifice scheme? In which case your pay is reduced by £400 and the employer makes all the contributions. So you dont get taxed on it and are not due a tax refund just as in a "net pay"arrangement.


On the other hand you state it is a contribution from gross pay. This would again make it a net pay arrangement and again you would not be due a refund.

bottleandahalf

Ahh, so does this mean my government top up is essentially the tax and NI I don't have to pay, from my pay being reduced?

lisyloo

bottleandahalf wrote: »

Ahh, so does this mean my government top up is essentially the tax and NI I don't have to pay, from my pay being reduced?

If it’s salary sacrifice the yes.
Assuming basic rate tax then if you were paid £400, you’d pay £80 tax and £48 NI, so you’d receive £272.

bottleandahalf

Thanks Linton for clearing that up for me.

So is salary sacrifice the best way to contribute to the pension in the workplace?

Linton

Salary sacrifice is good for employees but also for employers who don’t have to pay employers NI on the pension contributions. Some employers pass this saving onto their employees.

As to being the best, well if you were a low payed part time worker with income below their tax allowance, relief at source would give you tax relief on tax that you hadn’t paid. But given you are an employed taxpayer SS is as good as you are going to get.