My Work Pension Payments

Al_Ross

I am having a bit of a headache regarding my works pension.

My temporary new job became permanent in September and I agreed to make pension contributions starting then. I would pay 5% of my salary in and my employer would pay 3%. I believe this is also now the minimum legal amounts you can contribute.

My employer gave me the option to use an existing pension to pay this to. My previous employer used Aviva and found them good so I opted to stick with them.

The first months October went into my fund as it should, but I recently logged into to my Aviva to check on things and found nothing added for October, November, December and January.  My Pension contribution has been getting deducted from my salary every month.

My employer has now been in touch with Aviva and so have I. Aviva blame the problem on not being able to take the Direct Debit payment from my employer.

I have now been sent a copy of the letter Aviva have sent to my employer, stating the amount of the Direct Debits payments due by them. I believe this amount is incorrect.

Can anyone tell me what the total payment to my pension found should be each month if my basic monthly salary is £2500.

If you can also what my monthly contribution and my employer’s monthly contribution is.

There is also the problem of getting the missing contributions added to my fund and I don't seem to be getting anywhere with that either.

tacpot12

The answer will depend on whether the 5% that you are paying takes the tax relief into account. Most employers will say "You pay 5%" but only actually charge your payslip with 4% because they know that the government will give you 1% as your tax relief - this assumes they are not using a Salary Sacrifice scheme. You need to check whether they are using Salary Sacrifice. If they are, the numbers change because all of the contribution is coming from the employer. 

As an employee, if you can afford to have 5% deducted from your payslip, then this is better as you will be getting the tax relief on a 5% contribution, not a 4% contribution.

4% of £2500 would be £100 and 5% would be £125. So your contribution should be one of these two amounts. If there are different and the employer claims this is correct, the answer could be that they are using Salary Sacrifice. The employer's contribution should be 3% of £2500, so £75. So the total payments to Aviva should be either £175 or £200 per month. Aviva should have a process in place so that they know how much of the contribution is from you, and hence how much tax relief to claim from the government on your behalf. 

Al_Ross

Thanks for taking the time to reply Tacpot12,

The total payments going to Aviva according to Aviva's letter is £156.10

I am not on salary sacrifice contributions.

Someone in the know has told me the contributions are only on qualifying earnings and the first £6,240 does not count,twards pension contributions,so £30000- £6240 =£23760

or £1980 monthly salary which comes out at £158.40 still not quite the £156.10 though.

Is this correct though ?

Dazed_and_C0nfused

You also need to know if your employer uses the auto enrolment earnings threshold.

If so you will only be paying x% above the threshold, not on all of your salary.

Al_Ross

Auto enrolment,I believe.

squirrelpie

Surely what matters is what your employer deducts and hopefully eventually pays to Aviva? I wouldn't have thought that payment was via direct debit since that amount is then controlled by the recipient and in general Aviva have no way of knowing how much you earned in any particular month (there might be overtime or other exceptional payments, for example). So I'd expect your employer to determine the correct amount and to transfer that to Aviva. But I'm no expert on such matters.

LHW99

squirrelpie said:

Surely what matters is what your employer deducts and hopefully eventually pays to Aviva? I wouldn't have thought that payment was via direct debit since that amount is then controlled by the recipient and in general Aviva have no way of knowing how much you earned in any particular month (there might be overtime or other exceptional payments, for example). So I'd expect your employer to determine the correct amount and to transfer that to Aviva. But I'm no expert on such matters.

Different company, but II's SIPP contribution form allows setting up monthly employer payments by DD. That (supposedly) only requires one initial form, whereas if its done by monthly Bank Transfer a new form is needed every time.

Marcon

Al_Ross said:

I am having a bit of a headache regarding my works pension.

My temporary new job became permanent in September and I agreed to make pension contributions starting then. I would pay 5% of my salary in and my employer would pay 3%. I believe this is also now the minimum legal amounts you can contribute.

This doesn't sound as if it complies with auto-enrolment requirements.

How long were you in your 'temporary' job before it was confirmed as permanent in September? If the answer is more than 3 months, then your employer should have auto-enrolled you no later than 3 months after your 'temporary' job started.

Mininum pension contribution rates are mandatory; you don't get asked to agree to them, unless you want to pay in more. The employer must pay at least their minimum (but could agree to 'match' any payments you make in addition to the required legal minimum, IF that's a benefit they offer).

Al_Ross said:

My employer gave me the option to use an existing pension to pay this to. My previous employer used Aviva and found them good so I opted to stick with them.

...and not surprisingly, things have gone wrong. There's a reason why employers have to nominate an auto-enrolment scheme, especially smaller employers who don't have much pensions know-how in house/in their payroll provider. Giving individuals the option to choose their own pension provider usually results in an admin headache, and equally usually, things go wrong.

Al_Ross said:

Auto enrolment,I believe.

You need to find out. Your employer must provide you with the relevant information, so ask for it. Your approach doesn't need to be anything stronger than an 'interested enquiry'(!) to ensure relations with your employer aren't sullied.

Different rates of contribution can apply depending on what the employer uses as the basis of calculation. For example, if your basic earnings are used as the basis (i.e. your employer doesn't include things like bonuses, commission, overtime or similar), then auto enrolment contributions are at least 9%, with the employer paying at least 4% and the employee 5%.

Good, clear explanation here: https://www.nowpensions.com/employers/learn-about-workplace-pensions/what-is-auto-enrolment/

Al_Ross

Good, clear explanation here: https://www.nowpensions.com/employers/learn-about-workplace-pensions/what-is-auto-enrolment/

From nowpensions link:

Qualifying earnings
This is the minimum basis for calculating auto enrolment pension contributions. Qualifying earnings are all earnings between a lower and upper limit set by the government and reviewed each year. In 2022-2023 the lower limit is £6,240 and the upper limit is £50,270.

The minimum auto enrolment contribution to an employee’s pension savings is 8% of qualifying earnings. Employers must pay at least 3% and the employee the remaining 5%.

Qualifying earnings include salary, wages, commission, bonuses, overtime, statutory sick pay and statutory parental leave pay (maternity, paternity and adoption pay).

It would appear she has used Qualifying earnings to work out the amounts. The only thing that is missing is a cost-of-living bonus of £250 that all staff have been getting paid monthly from October through till March 2023.

This is a small business with 10 staff and the admin payroll lady has been working with us for 7 months.

dunstonh

My employer gave me the option to use an existing pension to pay this to. My previous employer used Aviva and found them good so I opted to stick with them.

That is messy. If done correctly, that means you would need be opted in.  Then you would need to opt out and then the employer pay contributions as individual employer contributions each month.  Then on anniversary periods, you would be opted in again, only to opt out.

My employer has now been in touch with Aviva and so have I. Aviva blame the problem on not being able to take the Direct Debit payment from my employer.

Aviva support regular direct debits as employer contributions but they won't accept auto-enrolment contributions if your employer is not the employer linked to the scheme.

I am not on salary sacrifice contributions.

By using your own pension rather than the auto-enrolment pension, that would then require two direct debits.  

Basically, you and the employer are trying to fudge auto-enrolment contributions onto a pension that is not set up to cater for auto-enrolment with that employer.

You generally find, that companies only tend to offer directors or key workers the ability to use their own scheme because of the extra work involved.