AVC and standard employer contributions

mark1234567890

Hello,

I have a second job where I pay 80% of my income into a NOW Pension scheme as an AVC. I do this as I don't really need the income now and I want to reduce my tax/NI bill. I also didn't start saving into a pension until I hit 30 a few year's ago so I'm a few years behind 

My employer seems to be basing their auto-enrollment contribution towards my pension on the amount after my AVC has been deducted. Is that right? Surely the employer's pension contribution should be calculated on my total gross pay and not after I have paid my AVC?

Some numbers to illustrate:

Total pay for week: £154.90
AVC @80%: £123.92
Employee auto-enrollment contribution: £1.75
Employer auto-enrollment contribution: £1.05
Net pay: £29.23

Any help on where I'm going wrong on this would be appreciated.

Thanks 

Albermarle

Probably better if you repost this in the main pensions forum as this auto enrolment one is a bit of a backwater so you are less likely to get an answer.

MallyGirl

they can calculate it based on the amount over a lower threshold of £120. so they only pay 3% of the diff between 120 and 154.9.
 Pretty stingy but within the rules

mark1234567890

MallyGirl said:

they can calculate it based on the amount over a lower threshold of £120. so they only pay 3% of the diff between 120 and 154.9.
 Pretty stingy but within the rules

Thanks for this reply. I'm still waiting for an official reply from the payroll department but this wouldn't surprise me if they did this.

Would I be able to get the full 3% contribution from my employer if I switched my 80% additional voluntary contributions to a Free Standing Additional Voluntary Contribution (FSAVC) pension scheme? This would mean an additional £15 a month going into my pension from my employer's 3% contribution calculated on my full earnings. 

However, I don't know if this would deliver the tax/NI savings I'm after as well? If I did set up an additional FSAVC then I would probably be taxed and NI-ed to death on my second-job earnings which would wipe out any benefit of getting additional employer contributions.

Thanks

mark1234567890

Just doing some research now and maybe a SIPP would be better and tax-efficient.

mark1234567890

MallyGirl said:

they can calculate it based on the amount over a lower threshold of £120. so they only pay 3% of the diff between 120 and 154.9.
 Pretty stingy but within the rules

I've just had a confirmation back from the payroll department that this is exactly what they're doing. In which case it wouldn't make any difference if I switched to another type of pension; they're still not going to pay their 3% on the £120.

Thanks for all the replies