Pension Contributions Credited to my Pension Fund

stksk8811

Hi guys,

I wonder if anyone can help me determine what I have noticed is 'standard practice' or something stranger or indeed something to be worried about.
I happen to be looking at my pension contributions paid from my salary into my pension and it would appear the contributions (the correct amount) are deducted at source but aren't credited to my pension fund for another, upto 3+ weeks.

I have contacted my employer and at the moment they are saying they hold onto the funds until the 'Payroll are ready to send over the payments to the 3rd parties' (pension management companies I assume).

So for that 3+ weeks, that money is neither in my hands / bank account nor in my pension fund. (where I would like it to be). Is it earning someone a tidy amount of interest - £80-£300 annually (for me alone) depending if you use inflation as your interest percentage or the reported annual percentage growth of the pension fund?

Or is this just the way it is?

Regards

Scott

[Deleted User]

Just the way it is for my company (400,000 people worldwide).
Payroll takes the money at the end of the month around the 27th or so, around the 10th of the next month you see "Not Invested" appear on the pension fund, around the 22nd of the month you see the "Invested" and if you check the purchase timings and dates the date purchased is the 10th of the month.
I did query it via the Works Council and its all down to reconciliation, manual blah blah blah

Paul_Herring

They're maliciously complying with the regulations. Most companies do this (including my own.)

https://www.thepensionsregulator.gov.uk/en/employers/managing-a-scheme/contributions-and-funding

You need to pay your contributions to your staff pension scheme on time. This includes calculating and deducting contributions from your staff's salaries. You must agree the due dates for paying contributions to the scheme with your trustee or provider.

However the law requires that when you deduct contributions from your staff's pay you must pay these to your staff pension scheme no later than the 22nd day (19th if you pay by cheque) of the next month.

Our payday is 26th (or nearest working day before.) Funds hit pension scheme anytime between (looking at the last 12 months) the 19th and 23rd of the next month.

Paul_Herring

Funds hit pension scheme anytime between (looking at the last 12 months) the 19th and 23rd of the next month.

.. and I've just noticed, it being the 23rd today, that December's deduction hasn't yet made it onto the account statement ...

stksk8811

Do you guys think this Pension Act 2008, was written around the existing technology used at the time, and since then, instance payment between accounts is almost standard in personal banking therefore the same technology should be used for our pensions contribution payments and should be reflected in an updated act?

greatkingrat

The deadline of the 22nd of the following month ties in with the deadline for paying over PAYE/NI contributions to HMRC.

I think the idea is that, particularly for large companies with multiple payrolls on different frequencies/dates, they can just wait until the end of the month and make one bulk payment to the pension provider rather than having to make multiple small payments every time someone is paid.

Malthusian

stksk8811 wrote: »

Do you guys think this Pension Act 2008, was written around the existing technology used at the time, and since then, instance payment between accounts is almost standard in personal banking therefore the same technology should be used for our pensions contribution payments and should be reflected in an updated act?

Funds could be transferred electronically within a week back in 2008 as well.

It would be nice if employers and pension companies were efficient enough that money could be deducted from your payslip and near-instantly invested in your pension, but if people cared that much they'd insist their employers used companies that guaranteed it in their Service Level Agreement. The pensions complaints system is not prepared to deal with complaints over it taking three weeks to invest someone's pension money.

If you are paid monthly like most people then it takes on average 2 weeks for you to be paid for work that you did on any particular day. (It takes 0 days to be paid for the work you did on payday and up to a month to be paid on work you did the dafter, averaging at 2 weeks.) So a few extra weeks to invest in a pension that is going to fluctuate in value constantly anyway really doesn't matter.

Nobody complains about delays in investing their money if the market went down over that period, and offers to pay their employer the money they saved.

Paul_Herring

stksk8811 wrote: »

Do you guys think this Pension Act 2008, was written around the existing technology used at the time, and since then, instance payment between accounts is almost standard in personal banking therefore the same technology should be used for our pensions contribution payments and should be reflected in an updated act?

Not really. Electronic payments were a thing even before 2008. To the point where faster payments (i.e. within minutes) started then:

http://www.fasterpayments.org.uk/about-us

At its launch in 2008, Faster Payments was the first new payments service to be introduced in the UK for more than 20 years.

bowlhead99

stksk8811 wrote: »

Do you guys think this Pension Act 2008, was written around the existing technology used at the time, and since then, instance payment between accounts is almost standard in personal banking therefore the same technology should be used for our pensions contribution payments and should be reflected in an updated act?

No.

Companies' payments to a pension scheme will in many cases be bigger than the faster payment limit, so are probably still being paid on the same time cycle and technology as they were a decade ago, even if you are pinging a tenner to your friend or savings account instantly.

If the act is a minimum standard that all companies must meet it has to be easy to achieve for all. The time taken the for the money to fly through the ether of the payment settlement/ clearing systems is not the major component of the number of days allowed. There is plenty of other stuff involved.

Your employment contract /employee handbook says you'll get paid your salary monthly or weekly or whatever. The pension contributions if not received on the same day as payday will not cause you to miss paying your rent or utilities bills or run out of food. So there is probably little appetite within government to rewrite legislation to force all employers to come up with quicker solutions for funding the investment of pension contributions.

One way to look at it is that if the employer holds on to the money longer and does well nancially from doing so, he can afford to pay better salary and benefits. If you tell him he must employ more staff or implement more expensive processes and manage his cashflow more tightly to enforce the payment to you and generate £100 a year extra investment growth for you... you might just find he can only afford to pay you a salary and benefits package that's £101 lower. So, be careful what you wish for.

stksk8811

So, I have had confirmation from my company that they wait until the end of the month before making their 1 bulk payment to the pension fund management company ....... that just leaves the other 17 days to explain lol

Paul_Herring

and generate £100 a year extra investment growth for you

Unlikely. The amount of money 'not doing anything' averages to, around and about, a month's worth of contributions not invested over the year.

Specifically, e.g., once March's deduction makes it's way 3 weeks later into the fund by April 22nd, Aprils deduction happens a week later.

There's never more than a month's contributions not being invested at any one time.

Average wage for UK, say £30,000. Contribution, say, 8%. So 30K*.08/12=£200.

At, to pluck a number, 7% growth, you're missing out on approximately £15 over a year.

(Personal experience may differ. My numbers come out to about £250 for that calculation. Yes, I realise I've just contradicted my initial statement...)