my AVC is placing me under the minimum wage threshold

DaveDonno

My company has stopped my tax relief on my pension contributions stating my AVC  is placing me under the minimum wage threshold. Yes, if I take out the pension contribution from my basic pay I would be under the minimum wage. This does not take into account my night shift premium that takes me over minimum wage. If true, this would affect every single person that pays more £77 as an AVC.
Are there any payroll/pension experts who may have seen this problem before?

dunstonh

The easiest solution is to stop paying into the AVC and pay into a personal pension instead.   
And yes, it is a fairly well documented issue.

Marcon

DaveDonno said:

My company has stopped my tax relief on my pension contributions stating my AVC  is placing me under the minimum wage threshold. Yes, if I take out the pension contribution from my basic pay I would be under the minimum wage. This does not take into account my night shift premium that takes me over minimum wage. If true, this would affect every single person that pays more £77 as an AVC.
Are there any payroll/pension experts who may have seen this problem before?

If you are paying your AVCs via salary sacrifice, your employer is correct. But if you are paying them as a personal contribution, that has no impact on the amount your employer is paying you (in terms of meeting minimum wage requirements, anyway).

cloud_dog

DaveDonno said:

My company has stopped my tax relief on my pension contributions stating my AVC  is placing me under the minimum wage threshold. Yes, if I take out the pension contribution from my basic pay I would be under the minimum wage. This does not take into account my night shift premium that takes me over minimum wage. If true, this would affect every single person that pays more £77 as an AVC.
Are there any payroll/pension experts who may have seen this problem before?

Have you calculated the minimum wage amount for the payment period for the usual hours worked?  And does your AVC plus existing SS amounts take you below this level?

If it does then just reduce your AVC by that amount so as to remain above the limit.

zagfles

dunstonh said:

The easiest solution is to stop paying into the AVC and pay into a personal pension instead.   
And yes, it is a fairly well documented issue.

Or just don't pay in via salary sacrifice! No need for a personal pension.

zagfles

DaveDonno said:

My company has stopped my tax relief on my pension contributions stating my AVC  is placing me under the minimum wage threshold. Yes, if I take out the pension contribution from my basic pay I would be under the minimum wage. This does not take into account my night shift premium that takes me over minimum wage. If true, this would affect every single person that pays more £77 as an AVC.
Are there any payroll/pension experts who may have seen this problem before?

There are basically 3 ways of paying into occupational pensions:

1) Salary sacrifice, where you agree to give up part of your salary in return for additional employer contributions to your pension

2) "Net pay", where pension is deducted before tax is applied, but after NI. So you pay NI on your full salary, but tax on salary after pension conts are taken off. This is the "traditional" way occupational pensions work

3) RAS - relief at source, where pension conts are taken off after tax and NI, so no tax relief in your payslip, instead the pension provider claims basic rate relief direct from HMRC.

The min wage issue is only an issue for 1) above, as your actual salary is reduced. Your employer can still use 2 and 3 even if the conts take you below NMW.

So when you say the employer "has stopped tax relief", it might be because they use RAS when they can't use sal sac, in which case your pension provider should claim the relief. Who is the provider?