DB Pension membership charges

slider09

Hi,

Question on pension tax relief for higher earners if I may - my wife has a DB pension through her employer.  Both her employer and my wife pay monthly contributions on a salary sacrifice basis.  However each and every month there is a deduction on her pay slip (under 'Deductions' along with the usual Tax and NI) for £116.50 for 'DB Pension'.  This £116.50 is a monthly charge my wife pays to be a member of the DB Pension scheme.  This is NOT a contribution to the pension but a cost / charge to be a member.  Is this cost eligible for tax relief given it's related to a pension, even though it is not a contribution?  

Thank you.

Tommyjw

The £116.50 is your wifes contribution to the pension scheme, it isnt a cseperate fee/charge, the employer doesnt directly contribute to your wifes pension in DB Schemes.

This payment as you said is paid through salary sacrifice so she will see NI savings 

slider09

Thanks for the reply.  My wife checked with HR and was told its a charge / membership fee to be part of the scheme.  My wife's pensions contributions and her employers are deduced as a salary sacrifice.

p00hsticks

slider09 said:

Thanks for the reply.  My wife checked with HR and was told its a charge / membership fee to be part of the scheme.  My wife's pensions contributions and her employers are deduced as a salary sacrifice.

My understanding of the term 'salary sacrifice' is that the employee gives up a portion of their salary totally (and thus pays less NI) in return for the employer making additional payments on their behalf. so if it is a true salary sacrifice scheme then you wife won't be making any contributions herself, they'll all be coming from her employer.  

slider09

Technically yes the contributions are paid by the employer, however it is still shown on the payslip - hence me saying employee contributions. Never seen a more complicated payslip :-)

As it happens, the £116.50 'DB Pension' charge is exactly 10% of the monthly pension contribution; pension contribution = £1165.04

Tommyjw

slider09 said:

Technically yes the contributions are paid by the employer, however it is still shown on the payslip - hence me saying employee contributions. Never seen a more complicated payslip :-)

As it happens, the £116.50 'DB Pension' charge is exactly 10% of the monthly pension contribution; pension contribution = £1165.04

I presume the 1165 figure is the year to date, "YTD" figure ? Which is the total paid over the tax year = 10 months since April in theory ?

It sounds like her HR is confusing things calling it a charge !

slider09

No, the £1165 is the monthly pension contribution

Linton

One thought......

Looking at some NatWest pension scheme documentation - https://employeebenefits.co.uk/the-benefits-offered-by-natwest-group/
I see that 

Pension

• Trust-based defined contribution (DC) pension scheme; employees are awarded 10% of their salary as pension funding.
• Save More Tomorrow initiative which automatically increases pensions contributions by 1% each year.
• Defined benefit (DB) pension, closed to new members.

The 10% matches @Tommyjw's observation.  Is the charge some sort of adjustment linked to the pension allowance? Perhaps the allowance is reduced because of the reduction in the salary or it is included in the SS amount and so not payable as extra salary.

Other than something like this I cant see any reason for an employer to make a charge to be a member of the employer pension scheme.  Probably best to get more precise information from HR.

Andy_L

slider09 said:

Technically yes the contributions are paid by the employer, however it is still shown on the payslip - hence me saying employee contributions. Never seen a more complicated payslip :-)

As it happens, the £116.50 'DB Pension' charge is exactly 10% of the monthly pension contribution; pension contribution = £1165.04

Is the "DB Pension charge" in a taxed or untaxed box of the payslip?


ISTR hearing that some schemes when they reduced the benefits of the scheme gave its members the option of paying extra to keep the earlier retirement age (eg 60 vs 65),and rather than having different employee contributions rate they called it a charge. It could be that and, for some odd administrative reason, they can't sal sac that part

slider09

Linton said:

One thought......

Looking at some NatWest pension scheme documentation - https://employeebenefits.co.uk/the-benefits-offered-by-natwest-group/
I see that 

Pension

• Trust-based defined contribution (DC) pension scheme; employees are awarded 10% of their salary as pension funding.
• Save More Tomorrow initiative which automatically increases pensions contributions by 1% each year.
• Defined benefit (DB) pension, closed to new members.

The 10% matches @Tommyjw's observation.  Is the charge some sort of adjustment linked to the pension allowance? Perhaps the allowance is reduced because of the reduction in the salary or it is included in the SS amount and so not payable as extra salary.

Other than something like this I cant see any reason for an employer to make a charge to be a member of the employer pension scheme.  Probably best to get more precise information from HR.

My wife does work for RBS - part of Natwest.  She gets a salary then 10% value account (so she can buy her benefits such as car or healthcare), then gets 10% pension funding.  This 'pension funding' is increased by her own contribution up to £1165 per month

slider09

Andy_L said:

slider09 said:

Technically yes the contributions are paid by the employer, however it is still shown on the payslip - hence me saying employee contributions. Never seen a more complicated payslip :-)

As it happens, the £116.50 'DB Pension' charge is exactly 10% of the monthly pension contribution; pension contribution = £1165.04

Is the "DB Pension charge" in a taxed or untaxed box of the payslip?


ISTR hearing that some schemes when they reduced the benefits of the scheme gave its members the option of paying extra to keep the earlier retirement age (eg 60 vs 65),and rather than having different employee contributions rate they called it a charge. It could be that and, for some odd administrative reason, they can't sal sac that part

It is under the deductions part of the payslip along with PAYE and NI - not part of the gross salary, just a deduction.

The NPA 60 vs 65 does sound familiar.  If this charge was to retain the NPA of 60 instead of 65 could tax relief be claimed back?