Aegon Salary Sacrifice error

Pat38493

Marcon said:

In a salary sacrifice scheme, contributions are sometimes (albeit incorrectly) labelled as 'employee' on payslips etc. What matters is what the pension provider thinks they are.

Employer contributions are always paid gross, and that's not how Aegon has treated them - here they think (for whatever reason) they are employee contributions. 

I'm sure I'm missing something but why would the pension provider care whether the contributions are salary sacrifice or not?  I thought it only made a difference to the amount of NI paid by the employee and employer?

dunstonh

Maybe I’m confused but my interpretation was that Aegon had treated the contributions as RAS and doubled up the tax relief.   If the contributions had been treated as net correctly, what difference would it make on the Aegon side whether it was classed as employer or employee?  In my salsac scheme my contributions as labelled “employee” but the amount is correct I.e. Aegon are not adding any tax relief on their side.

Whilst it is possible that Aegon are at fault, you need to remember that these are pretty automated systems and it is the employer's payroll department that input the figures into Aegon's system.   For Aegon to be at fault, they would need to be taking a figure input by the employer/payroll and their computer converting it to a different box.  That seems unlikely.   These things are nearly always GIGO and the fault is with the inputter.

Marcon

Pat38493 said:

Marcon said:

In a salary sacrifice scheme, contributions are sometimes (albeit incorrectly) labelled as 'employee' on payslips etc. What matters is what the pension provider thinks they are.

Employer contributions are always paid gross, and that's not how Aegon has treated them - here they think (for whatever reason) they are employee contributions. 

I'm sure I'm missing something but why would the pension provider care whether the contributions are salary sacrifice or not?  I thought it only made a difference to the amount of NI paid by the employee and employer?

It makes a difference to whether or not the pension provider adds a tax top-up in a relief at source (RAS) scheme.

Employer pension contributions are paid gross to the provider, so don't attract a tax top up. Salary sacrifice contributions are an employer contribution, so they are paid gross - no tax top up.

True 'personal' contributions to a RAS scheme are paid out of the member's net salary, and the provider adds a tax top-up at basic rate to the individual's pension pot.

JoeCrystal

Pat38493 said:

Marcon said:

In a salary sacrifice scheme, contributions are sometimes (albeit incorrectly) labelled as 'employee' on payslips etc. What matters is what the pension provider thinks they are.

Employer contributions are always paid gross, and that's not how Aegon has treated them - here they think (for whatever reason) they are employee contributions. 

I'm sure I'm missing something but why would the pension provider care whether the contributions are salary sacrifice or not?  I thought it only made a difference to the amount of NI paid by the employee and employer?

I had the same issue a few years back with my employer. It was the employer's fault as payroll misunderstood the pension scheme and could not understand how tax relief works. I know I had a tough time convincing the Payroll that it was not right, and answers back kept mixing up terms on tax relief. It took about a year of emails before they finally admitted that they would look into it.

It was the Payroll's first proper pension scheme for the company after all, admittedly forced to by auto-enrolment. To fix the error, the pension company adjusted the numbers from the first to the final contributions to date, taking off all the tax relief. I knew since I was the one that raised the issue and explained the issue to Payroll.

Interestingly enough. I understand that the employer or pension company does not need to inform the employees, so at least the OP's employer even bothered to write to them about this issue. 

mattparrett

Thanks everyone for your comments. I have gone through in more detail with my employer, I do believe it was a genuine error on their side in that when the company moved to autoenrolment and the system changed with Aegon the new form had a column for both Eers and Eees contributions. I am surprised it went unnoticed for so long. The employer has put together a spreadsheet for all employees to show the impact. I can understand my colleagues who are nearing retirement being annoyed but the younger generations have time on their hands to put more in should they wish.

Aegon told the Company, which was passed on to the employees, that they would make the corrections. This was back in January 2022 and still no adjustments have been made. Am i right in thinking they can only go back 6 years, or have i dreamt this up?

As Altior said in their comment, what happens to the gains made on the pension tax relief, I would be very annoyed if Aegon kept it.

Marcon

mattparrett said:

Thanks everyone for your comments. I have gone through in more detail with my employer, I do believe it was a genuine error on their side in that when the company moved to autoenrolment and the system changed with Aegon the new form had a column for both Eers and Eees contributions. I am surprised it went unnoticed for so long. The employer has put together a spreadsheet for all employees to show the impact. I can understand my colleagues who are nearing retirement being annoyed but the younger generations have time on their hands to put more in should they wish.

Aegon told the Company, which was passed on to the employees, that they would make the corrections. This was back in January 2022 and still no adjustments have been made. Am i right in thinking they can only go back 6 years, or have i dreamt this up?

As Altior said in their comment, what happens to the gains made on the pension tax relief, I would be very annoyed if Aegon kept it.

They can go back as many years as necessary to correct the error.

You're assuming there were gains made on the 'extra' tax relief - could well have been losses! 

dunstonh

Am i right in thinking they can only go back 6 years, or have i dreamt this up?

They can go right back to inception.

As Altior said in their comment, what happens to the gains made on the pension tax relief, I would be very annoyed if Aegon kept it.

Aegon could end up keeping any gains if any.  However, if there are losses, they may well look to the employer to cover them.

Pat38493

Logically shouldn’t any gains go back to HMRC as the money funding the excess balance in the funds effectively came from them?