Work making incorrect personal contributions to pension for 24months-is there any liability on them

Droppin_neutron

Discovered very recently that my workplace, who were instructed by me in writing on me joining 24 months ago to pay 5% of my salary into the scheme, have only been paying between 1.2 and 1.5% in.  So I have had the money, but in my salary and taxed at 40%... whereas I would have been better off had it gone into my pension undr salary sacrifice. 

Is there any liability on my employer here, or do I have to accept that I should have checked it? 

MallyGirl

are you sure that they haven't been doing 5% of the salary above a threshold?

Droppin_neutron

they absolutely have not been doing that.... they have even accepted that it ha been done wrongly, but told me that it was my responsibility to check. Also they said that this had been checked by an 'external expert' who had agreed with them...

Albermarle

You could mainly recover the situation yourself, by making a lump sum contribution equal to the contributions you should have made, but did not.
You will still get 40% tax relief, although you might have to claim some of it from HMRC, You would need to check first that the pension provider will accept lump sum payments direct from you ( and add on basic rate tax relief, which they do not have to do with contributions coming from a salary sacrifice scheme)
You will still lose out a small amount of NI as the payment will not go through the salary sacrifice scheme.
Probably you have not lost out much in terms of investment growth over the last 24 months.

By the way if you are only paying 5% and the employer similar, it is inadequate to build up a decent pot. Higher rate taxpayers should maximise their contributions as much as possible, due to the very generous 40% tax relief.

So overall your financial loss due to this error is unlikely to be that large, but hopefully you can persuade the company to pay something.

penners324

They could fix it by making 1 large deduction on your next payroll....

It's an error by the payroll department not really any liability on the company 

Marcon

penners324 said:

They could fix it by making 1 large deduction on your next payroll....

It's an error by the payroll department not really any liability on the company 

The company is responsible for its payroll department, so there most certainly is liability where a complaint is valid.

The problem here is that the complaint may not be valid - OP should indeed have been more alert. Letting the situation drag on for two years without ever 'noticing', isn't going to help their case. The remedy is in their hands, as suggested above: pay in more now. 

400ixl

What liability are you looking for them to accept?

They are unlikely to be responsible for paying the difference into your pension without that funding coming from you if that is what you are looking for. They have paid you the money, it didn't go to the right pot, granted, but they have still paid you.

Marcon

400ixl said:

What liability are you looking for them to accept?

They are unlikely to be responsible for paying the difference into your pension without that funding coming from you if that is what you are looking for. They have paid you the money, it didn't go to the right pot, granted, but they have still paid you.

I was mainly concerned by your assertion that a company isn't liable for the actions of its own payroll department!

Liability? The consequences (if any) of a valid complaint, as I said above. 

El_Torro

This is annoying, undoubtedly. What do you expect your employer to do about it though? They've already admitted their part in the error, and presumably are willing to change your future contributions to whatever percentage you want. They've already said you were at least partly responsible for it lasting so long. Of course they might just be fobbing you off and hoping you don't take it any further. 

I would be wary of making a bigger issue of it, after all do you really want to be considered an awkward employee? Especially since as others have said it's relatively easy for you to make up the difference of what they haven't contributed to your pension until now. 

On the bright said any contributions made this  year have probably lost money, due to what global stock markets are doing.

400ixl

Sorry, wasn't aimed at you, I meant what does the OP want? I haven't said they aren't responsible for their payroll inaction, just that they have actually paid the OP what was owed.

They are unlikely to get the company to fund the missing payments themselves, or do you believe they should? Maybe they should be liable for any growth the OP missed out on in their pension, although that may be a negative figure at the moment.

Droppin_neutron

Thanks everyone for the comments. As well as not following the instruction to take 5% for personal contributions, they also were not paying the 10% employer contributions in my contract - instead only paying 1%.  They have acknowledged this and are paying one lump sum in this month to my pension pot...
I wondered if I could claim that as they had not followed the written instruction to take 5% and instead causing me to pay income tax, I might have claim to recoup the tax - but probably not... And as for being more vigilant over my payslips.... I totally get this but honestly, I never opened them!