Employer contributions

Overtherainbwo

Hi 

I need some help understanding my employer contributions amount. I am give 5% as per my contract but when I work this out on my salary it should be £141.62 per month. However, when I have logged into Nest it shows regular employer contributions of £115.63. I am not sure if anything as to be deducted off, such as tax (I pay in a separate amount and have a tax contribution on top as well)? I am going to ask but would like to have it in my head before as find this stuff very confusing and they don't always explain it properly. 

Thanks 

El_Torro

Without knowing all the details could the £115.63 figure be before tax relief? The pension provider then adds the 20% tax relief to increase the total gross monthly contribution to £141.62.

Overtherainbwo

I think the tax relief goes on top of my contribution. 
The breakdown is
Salary £33990 
employer contribution as per contract is 5%. -  I would say this should be £141.62 but they have been putting in £115.63
I opted to put in 5% when I joined, but £92.50 gets taken from my salary & then tax relief to make it up to £115.63 

I have logged in to check as went to up my contributions, but I don't understand why I get £141.62 and they pay £115.63. The contract just states I get a 5% employer contribution. 

westy22

Your pension deductions are probably based on 'Qualifying Earnings'.  The Government sets the lower and upper limit - for 20-21 the lower limit is £6,240 and the upper limit is £50,000.  Therefore your contributions will be based on £33,990-£6,240 = £27,750 Qualifying Earnings.  £27,750 x 5% /12 months = £115.63 per month.

Dazed_and_C0nfused

You are both paying 5%.

Auto enrolment pension contributions do not have to be based on your "salary".

Your employer is taking into account the qualifying earnings rules.

If you wish to contribute 5% of your salary (before basic rate tax relief) then you would need to increase your contribution to 6.125%

£33,990 x 5% = £1,699.50

£33,990 - £6,240 = £27,750
£27,750 x 6.125% = £1,699.68

The current contributions are,
£27,750 x 5% = £1,387.50
£1,387.50 / 12 = £115.625

Overtherainbwo

Ok, thank you.  do you know if this is mandatory / it should state this in a contract? 

westy22

It's not compulsory, but the vast majority of auto-enrolment pensions are based on the qualifying earnings rule.

Albermarle

More generous employers will base it on the full salary , but it seems that many do not .

Marcon

Overtherainbwo said:

Ok, thank you.  do you know if this is mandatory / it should state this in a contract? 

It's mandatory to pay the minimum. Have you looked to see what your contract/staff handbook/pensions info says?

Albermarle said:

More generous employers will base it on the full salary , but it seems that many do not .

It's not a question of generosity, especially now - more a question of employer survival. A few extra quid in the pension pot might be nice, but actually having a job is of more immediate concern to many.

Brynsam

Albermarle said:

More generous employers will base it on the full salary , but it seems that many do not .

Pension contributions are simply part of the overall package. Many employers are well aware that staff prefer cash today, especially those in their 20s and 30s, and that's how they structure their remuneration offering.

Overtherainbwo

It just says you will receive a 5% pension on your salary via the company pension scheme. Previous jobs have always paid on the whole of the base salary so wasn't aware that different rules can apply. Thanks All