SIPP contribution calculation - 8% of what?

pamalpass

My wife has recently started  new job and has now been auto-enrolled into the Company SIPP scheme.

So i expected her contributions to be 3% and 5% of her gross salary.

However, the employer is deducting £512 from her monthly gross pay before calculating the % contribution.

The £512 is the lower earnings level. I am going to dispute this as her contract states it should be from her gross salary.

However, has anyone else ever seen this ? Basically her contributions are approx £40 per month lower than I believe they should be.

Paul

Dazed_and_C0nfused

Perfectly legal even if unwanted and unhelpful.

Fairly unusual for contributions to be going into a SIPP.

https://www.thepensionsregulator.gov.uk/en/employers/new-employers/im-an-employer-who-has-to-provide-a-pension/declare-your-compliance/ongoing-duties-for-employers-/earnings-thresholds

molerat

She needs to carefully read her contract.  They are applying the correct "qualifying earnings" methodology for pension payments. This would be a contractual matter and with little time in the job she could be looking for a new one sooner than she expected !  And you are in no position to dispute anything unless of course you want that P45 coming even quicker.

pamalpass

I may have th ewrong terminology. Its the Salary Sacrifice scheme to an Aegon scheme.

Her contract states it i calculated from her gross salary and will be placed into her pension scheme. It does not mention qualifying salary or anything to do with deducting the lower earnings limit.

It does state that unless you earn more than lower earnings then auto enrolment doesnt occur.

Dazed_and_C0nfused

It sounds to me like it is being "calculated" from her gross salary and the employer is choosing to take into account the lower earnings limit in that calculation.

Also, although not relevant to your current question it might be useful for you to note for future reference that your wife isn't contributing anything to her pension.  Salary sacrifice is where she agrees to a lower salary in return for the employer contributing to the pension.  As a result she will probably be paying less tax and less National Insurance.  For a lot of people salary sacrifice is the most tax/NIC efficient way to get money into a pension. 

For example if her salary was £2,000/month and she sacrifices 3% then her taxable income is only £1,940.  Lower earning complication ignored for the purpose of that example.

pamalpass

As you say they are deducting the Lower earnings limit then calculating the % to deduct/contribute.

My concern is that this is not explicitly mentioned anywhere. Not in any Scheme documentation or contract.

My scheme does not work that nor do others that she has been a member of.

Paul_Herring

My concern is that this is not explicitly mentioned anywhere. Not in any Scheme documentation or contract.

Qualifying earnings  are the legal minimum requirement, and if used I would not necessarily expect them to be explicitly mentioned in the contract, but I'd expect the numbers appear in any pension documentation. They're probably implicitly mentioned using verbiage alluding to 'auto enrolment.'

OTOH, I'd expect any deviation from that (e.g. calculated on all salary with no lower or upper limits, as more enlightened employers would do) to be explicitly documented.

JoeCrystal

pamalpass said:

As you say they are deducting the Lower earnings limit then calculating the % to deduct/contribute.

My concern is that this is not explicitly mentioned anywhere. Not in any Scheme documentation or contract.

My scheme does not work that nor do others that she has been a member of.

My work pension scheme does, and they do not mention as such in the scheme information or contract. It is just one of these things. Hopefully, in the long run, they would get rid of the qualifying earnings.

Thrugelmir

Could your wife not simply increase the % of salary sacrificed if a higher contribution level is desired. 

pamalpass

She already has increased the amount but its the principle of the thing and the £15 per month the company is keeping. ;-)

Andrew31

pamalpass said:

She already has increased the amount but its the principle of the thing and the £15 per month the company is keeping. ;-)

They arent keeping it.  They are just not giving it as a pension contribution.   All legal and above bored, if a bit cheap.    NAme and shame if they are a big company!