Aviva Pension - "You don't get tax relief on contributions that your employer makes"

TempUsername03052020

Hi All,

I have received my yearly statement and have seen the below entry on the section in Payments into your plan

"You don't get tax relief on contributions that your employer makes"

Does anyone know why it says this? Do i need to claim for tax relief?

Thank You

nick74

It is correct, you don't get tax relief on employer's contributions, your employer does.

jonnygee2

How do you pay into your pension? Is everything done through your employer and on your payslip?
Or are you making separate contributions eg you get paid, and then you send some extra money somewhere?

TempUsername03052020

nick74 said:

It is correct, you don't get tax relief on employer's contributions, your employer does.

On the statement under payments into your plan there is only 1 payment type paid in:

- Contributions your employer has made

which includes both my personal contribution and the employers contribution. The statement does not seperate between the two.

Is that normal?

nick74

Are you in a salary sacrifice scheme? If so, then all of the contributions are technically 'employers contributions', and you don't get tax relief because you've not been taxed on any of it in the first place.

TempUsername03052020

jonnygee2 said:

How do you pay into your pension? Is everything done through your employer and on your payslip?
Or are you making separate contributions eg you get paid, and then you send some extra money somewhere?

It is all done through my employer and on my payslip. I do not add anything additional outside of this.

Although I am just over into the higher tax threshold of 40% so do i need to claim that 40% tax relief back from HMRC or would the tax relief already have been applied (which i thought it would of?)

dunstonh

Employee contributions get tax relief. Employer contributions do not.  

The employer gets the "relief" through a reduction in corporation tax.    

As mentioned higher up, if salary sacrifice is being used (sometimes referred to as smart pension), then all the contribution is classed as an employer contribution as your salary is artificially lowered (resulting in less tax and NI paid by you) and the employer makes the contribution as a gross contribution which in turn lowers their corporation tax bill.

Although I am just over into the higher tax threshold of 40% so do i need to claim that 40% tax relief back from HMRC or would the tax relief already have been applied (which i thought it would of?)

It sounds like yours is using salary sacrifice as there is only an employer contribution.  So, nothing for you to claim back as you are not making a contribution personally.

Albermarle

It sounds like yours is using salary sacrifice 

Probably worth the OP just double checking with his employer that they are operating a salary sacrifice arrangement for pension contributions. If it is ( which sounds very likely) then there will also be reductions in NI payable.

OP - it would be worth becoming more familiar with the details of your employers scheme and pensions in general .

https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension

TempUsername03052020

dunstonh said:

Employee contributions get tax relief. Employer contributions do not.  

The employer gets the "relief" through a reduction in corporation tax.    

As mentioned higher up, if salary sacrifice is being used (sometimes referred to as smart pension), then all the contribution is classed as an employer contribution as your salary is artificially lowered (resulting in less tax and NI paid by you) and the employer makes the contribution as a gross contribution which in turn lowers their corporation tax bill.

Although I am just over into the higher tax threshold of 40% so do i need to claim that 40% tax relief back from HMRC or would the tax relief already have been applied (which i thought it would of?)

It sounds like yours is using salary sacrifice as there is only an employer contribution.  So, nothing for you to claim back as you are not making a contribution personally.

Thank you for this clarity, so if on salary sacrifice the tax relief is already applied before i'm paid?

Albermarle said:

It sounds like yours is using salary sacrifice 

Probably worth the OP just double checking with his employer that they are operating a salary sacrifice arrangement for pension contributions. If it is ( which sounds very likely) then there will also be reductions in NI payable.

OP - it would be worth becoming more familiar with the details of your employers scheme and pensions in general .

I currently am being paid via PAYE through a recruiter and not directly from the company I work for as am on a fixed term contract.

Would Aviva know whether I am on a slary sacrifice arrangement or would i need to speak through my recruiter?

Again thank you both for the help.

dunstonh

Would Aviva know whether I am on a slary sacrifice arrangement or would i need to speak through my recruiter?

They don't need to know.  All they need is whether the contribution is employee or employer.  Your pension statement will show Employer and employee contributions (or just employer if salary sacrifice).   These figures should match your payslip. The employer's payroll is where the tax is handled. 

Albermarle

Thank you for this clarity, so if on salary sacrifice the tax relief is already applied before i'm paid?

Your salary is reduced by the amount of pension contributions you make , so you never pay tax on them in the first place , that is why no further tax relief is added. Also you make some gains by paying less National Insurance contributions , as your salary is effectively lower. 

This reduction in salary is then added to by your employer with their contributions, and the whole amount appears in your pension as 'employer contributions'.  If you check your pension it will show just one payment per month from your employer .

If it shows two payments , one from employee  and one from  employer , then they are not operating a salary sacrifice arrangement.