Incorrect DC scheme contributions

click86

I've recently noticed that both my employer and employee contributions on my DC scheme are incorrect.

They should be the minimum rates but the contributions equate to far less.

I have used the Money Advice Service 'Workplace Pension Calculator' to confirm this (both Net Pay and Relief at Source has been considered).

Under 2 years service, and with the current economic climate, naturally I feel uneasy mentioning anything.

If I wait until I reach two years service, would the company pay in the missing employer contributions?

Obviously I will take a hit in my salary paying the rest of my employee contributions - I imagine I could do a 'payment plan' rather than a lump sum?

Any advice appreciated.

Brynsam

Are you sure your contributions are wrong? Your employer doesn't have to pay a % of gross pay, but can base contributions on 'qualifying earnings', which I suspect might be what's happening here.

For the 2020/21 tax year, this is earnings in the 'band' from £6,240 up to £50,000. 

Your minimum contribution rate will be 5% (1% of this is tax relief), and the employer's minimum contribution is 3%.

Try those numbers and see what they look like.

JoeCrystal

click86 said:

Any advice appreciated.

This particular salary calculator had a neat feature where you can use the qualifying earnings properly. (https://www.thesalarycalculator.co.uk/salary.php) If you have a look at the pension tab, the auto-enrollment is already selected.

An employee on a minimum wage using auto-enrollment qualifying earnings (£17k) would only be paying £44.83 per month gross (which is significantly less than £70.83 per month as one might expect). So it is likely you got the numbers wrong.

If you are unsure, post the numbers and we can confirm if they are correct.

click86

The tax relief on my pension statement says £0.00 so it should be a net pay arrangement.

I also used the calculator on the Pension Regulators website and again, this shows more than my actual contributions for both. This calculator takes into consideration the qualifying earnings bracket.

I do believe this is a genuine mistake by my employer but ideally would like to get it sorted.

Thrugelmir

Raise a query with your payroll department asking how it is calculated. No need to say that you think it's wrong at this stage, 

JoeCrystal

click86 said:

I do believe this is a genuine mistake by my employer but ideally would like to get it sorted.

Get in touch with your employer's payroll and ask how it is calculated. They should be able to explain how they arrive at the figures. 

click86

JoeCrystal said:

click86 said:

Any advice appreciated.

This particular salary calculator had a neat feature where you can use the qualifying earnings properly. (https://www.thesalarycalculator.co.uk/salary.php) If you have a look at the pension tab, the auto-enrollment is already selected.

An employee on a minimum wage using auto-enrollment qualifying earnings (£17k) would only be paying £44.83 per month gross (which is significantly less than £70.83 per month as one might expect). So it is likely you got the numbers wrong.

If you are unsure, post the numbers and we can confirm if they are correct.

I started by putting in the 17k to match the figures you got. Just so I knew where I was looking.

I then put my actual salary in and checked the same column.

It came out short.

I'm starting to think I'm due some tax relief. Is this a possibility?

Brynsam

Could you give the name of the pension scheme you are in? It's unlikely you are in a net pay arrangement - more likely to be relief at source, but the tax reclaim hasn't yet been added by the pension scheme administrators - not all pension plans add the relief immediately.

How do the figures look if you multiply your contribution by 1.25 (i.e. tax at basic rate added to the amount you paid in)? There's no tax credit on employer contributions, which are paid gross.

click86

Brynsam said:

Could you give the name of the pension scheme you are in? It's unlikely you are in a net pay arrangement - more likely to be relief at source, but the tax reclaim hasn't yet been added by the pension scheme administrators - not all pension plans add the relief immediately.

I think you have all cracked it!

I just calculated at 1% (tax relief rate) using the calculator provided by @JoeCrystal and this matched how short my contributions were.

I must have thought my employers contributions were wrong as I was convinced it was a net pay arrangement. Evidently this isn't the case though.

Thank you very much for your help on this. It's very much appreciated.

I'll give it some more time for the tax relief to land as I've just read online it can take up to 3 months to go through.

Thanks again, everybody

ffacoffipawb

click86 said:

Brynsam said:

Could you give the name of the pension scheme you are in? It's unlikely you are in a net pay arrangement - more likely to be relief at source, but the tax reclaim hasn't yet been added by the pension scheme administrators - not all pension plans add the relief immediately.

I think you have all cracked it!

I just calculated at 1% (tax relief rate) using the calculator provided by @JoeCrystal and this matched how short my contributions were.

I must have thought my employers contributions were wrong as I was convinced it was a net pay arrangement. Evidently this isn't the case though.

Thank you very much for your help on this. It's very much appreciated.

I'll give it some more time for the tax relief to land as I've just read online it can take up to 3 months to go through.

Thanks again, everybody

If Hargreaves Lansdown is anything to go by, the tax relief arrives by 22nd of the following month.

Similar experience with A J Bell Youinvest.

Marcon

ffacoffipawb said:

click86 said:

Brynsam said:

Could you give the name of the pension scheme you are in? It's unlikely you are in a net pay arrangement - more likely to be relief at source, but the tax reclaim hasn't yet been added by the pension scheme administrators - not all pension plans add the relief immediately.

I think you have all cracked it!

I just calculated at 1% (tax relief rate) using the calculator provided by @JoeCrystal and this matched how short my contributions were.

I must have thought my employers contributions were wrong as I was convinced it was a net pay arrangement. Evidently this isn't the case though.

Thank you very much for your help on this. It's very much appreciated.

I'll give it some more time for the tax relief to land as I've just read online it can take up to 3 months to go through.

Thanks again, everybody

If Hargreaves Lansdown is anything to go by, the tax relief arrives by 22nd of the following month.

Similar experience with A J Bell Youinvest.

If OP's scheme says 3 months, pretty irrelevant what other providers do.