Martin Lewis: An important warning to every employee in the UK

MSE_Eesha

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Martin Lewis: An important warning to every employee in the UK

Please click 'post reply' to discuss below.

rtho782

Does this not miss out the fact that pension contributions also have NI relief? Only seems to account for tax relief.

hugheskevi

rtho782 said:

Does this not miss out the fact that pension contributions also have NI relief? Only seems to account for tax relief.

Only employers operating salary sacrifice give NI relief on 'member' contributions (which are actually employer contributions). Member contributions made via net pay or relief-at-source do not have any NI relief.

steve.hinde

You need to be aware that having a company pension REDUCES your state pension. I requested a state pension forecast and discovered that mine will be reduced by £125 per week due to my Royal Mail pension

winn_2

How do I check if I paid into a pension scheme 40 years ago?

fudgecat

While Martin's information may be broadly true, there are exceptions. As a VERY part time supply teacher, I found myself autoenrolled in Now Pensions. They decided to take a blanket sum of money each month in fees for all pension pots. The smaller the pension pot, the more outrageous the fees proportionally. With Covid, I have not worked in over a year, the year before I earned under £1000.00.  Any money deducted from this towards a pension has been completely eaten up in fees.  It is effectively a tax for working!
Luckily I make my own arrangements and already receive a pension.
Low earners on poor auto enrol schemes beware.
 

Thomasjo

I have already taken a pension, I have another frozen pension and have taken a job on a year’s contract, it is likely the contract will be extended but no guarantee, should I opt out of nest?

truncheon

The tax relief on pension contributions is grossly unfair.  Those who pay the higher rate of tax get at least twice the State aid of basic rate taxpayers.  No politician or journalist would ever raise this issue as it would directly impact on either their retired income, votes or both.  Equalize the relief.now.

hugheskevi

You need to be aware that having a company pension REDUCES your state pension. I requested a state pension forecast and discovered that mine will be reduced by £125 per week due to my Royal Mail pension

This is no longer the case, it only applied to contracted-out pensions up to 5th April 2016.

As a VERY part time supply teacher, I found myself autoenrolled in Now Pensions. They decided to take a blanket sum of money each month in fees for all pension pots. The smaller the pension pot, the more outrageous the fees proportionally.

DWP are changing the rules to prohibit flat-rate charges on pension pots under £100.

I have already taken a pension, I have another frozen pension and have taken a job on a year’s contract, it is likely the contract will be extended but no guarantee, should I opt out of nest?

Why pass up the employer contribution?

The tax relief on pension contributions is grossly unfair.  Those who pay the higher rate of tax get at least twice the State aid of basic rate taxpayers.  No politician or journalist would ever raise this issue as it would directly impact on either their retired income, votes or both.  Equalize the relief.now.

Not paying as much tax is rather different to receiving State aid.

Basic and higher rate taxpayers both get the same rate (100% of the contribution) of pre-tax income going into their pension. A pension moves income from being received at the current time into being received in the future, and the income is taxed when it is received, at the rates which apply at that time.

Equalising relief would see the same income taxed twice, partially when it first goes into the pension, and again when it is withdrawn. There would also be very significant issues to overcome relating to salary sacrifice, employer pension contributons and Defined Benefit pensions, so it would not be a simple change to make. You would probably end up with a LISA-style contribution system for Defined Contribution which taxes the input and gives a tax free outcome, and a different system for Defined Benefit (which is mostly public sector anyhow) to avoid huge complexity.

Salary sacrifice and the rate of relief received by non-tax payers is probably a bigger issue of fairness - why the rate of National Insurance and income tax relief received by an individual varies according to the payroll system and type of contribution an employer chooses makes no sense at all.

Annikka_Green

winn_2 said:

How do I check if I paid into a pension scheme 40 years ago?

Check old payslips or other communications from your employer at the time informing you who is managing the pension. If you don't have this, don't worry. You can usually find out by contacting the payroll or finance department of your employer at that time. Once you know the pension company involved you can contact them to find out the current valuation.
If the firm you worked for has closed down since then, you can enlist a company that specialises in tracing old pensions (check for their small print as there may be a fee involved).
It can, understandably, take quite a lot of effort to get through the security involved and you usually will need to give at a minimum your full name, date of birth and national insurance number.

UsetheFORCE

Has it also been pointed out that any pension contributions are allowed for in the claiming of Universal Credit? You will get back 55% of whatever you pay into your pension in greater UC payments!