Are my Pension being contributed via Salary Sacrifice?

HarveyNichols99

Latest monthly payslip below for April 2023. 


My Pensions provider's emailed me:
'Your contribution will be 5% of your pensionable earnings. This will be taken directly from your pay before tax is calculated. The amounts will go up or down according to how much you earn. You may also benefit from potential tax relief. Your employer will also contribute 3%.
We operate a net pay arrangement. This means any contribution you make is deducted before income tax is calculated. If you're a taxpayer, this means you automatically get tax relief on your pension contributions at the highest applicable rate.'

I thought this meant my pensions would be contributed via a salary sacrifice (SS) so I save on income tax contributions as a higher rate tax payer. But when I put my numbers in a Net Salary Calculator I feel my Pensions aren't being contributed via SS as the tax I'm actually paying is higher than what the calculator says it should be. And yes, I also fiddled with the numbers on the calculator to get as close to my true gross earnings on this payslip as possible.

So if my pensions aren't being contributed via SS, does this mean I have to contact HMRC to get the tax relief?

And why would my pensions provider say they're being taken as a net pay arrangement if it's not the case?

molerat

Your pension provider will do as they are informed by your employer or according to the service they offer.  Looks like a bit of a communication error here, your pay slip indicates it is relief at source so the pension should be adding basic rate tax. What does your pension account show for contributions received ?

Salary sacrifice is different to net pay.  Net pay purely reduces the tax you pay, salary sacrifice reduces your wage and all contributions are employer meaning you pay reduced tax and NI.

MallyGirl

it is not salary sacrifice - that is different from net pay.

My payslip shows my sal sac amount as a negative in the payments side so it is deducted before tax and NI are calculated.
The pension YTD figure doesn't include the amount from my employer at all and just shows the amount I have sacrificed in there. With sal sac it is all 'er' contributions.

Dazed_and_C0nfused

HarveyNichols99 said:

Latest monthly payslip below for April 2023. 


My Pensions provider's emailed me:
'Your contribution will be 5% of your pensionable earnings. This will be taken directly from your pay before tax is calculated. The amounts will go up or down according to how much you earn. You may also benefit from potential tax relief. Your employer will also contribute 3%.
We operate a net pay arrangement. This means any contribution you make is deducted before income tax is calculated. If you're a taxpayer, this means you automatically get tax relief on your pension contributions at the highest applicable rate.'

I thought this meant my pensions would be contributed via a salary sacrifice (SS) so I save on income tax contributions as a higher rate tax payer. But when I put my numbers in a Net Salary Calculator I feel my Pensions aren't being contributed via SS as the tax I'm actually paying is higher than what the calculator says it should be. And yes, I also fiddled with the numbers on the calculator to get as close to my true gross earnings on this payslip as possible.

So if my pensions aren't being contributed via SS, does this mean I have to contact HMRC to get the tax relief?

And why would my pensions provider say they're being taken as a net pay arrangement if it's not the case?

No, salary sacrifice means you don't actually contribute to a pension, you agree a reduced salary in return for additional employer contributions.

But the statement you highlighted is completely at odds with your payslip.  The statement matches how Now: Pensions operate but your payslip is indicating RAS contributions not net pay.

If this isn't resolved asap it will be a horrendously complicated mess to sort out!

xylophone

You are a member of NOW pension scheme?

https://www.nowpensions.com/help-and-support/members/faqs/pension-basics/how-does-tax-relief-work/#:~:text=NOW: Pensions operates a net,you contribute to your pension.

Net pay

NOW: Pensions operates a net pay scheme. This means pension contributions come out of your pay before income tax is taken off. As a result, if you’re a taxpayer you automatically get full tax relief – you don’t pay any income tax on the money you contribute to your pension.

If you don’t pay tax, you don’t automatically get tax relief, but you can claim your tax relief through our tax top-up scheme. See What is the tax top-up scheme? for more about this.

Other types of tax relief
You may have seen another tax relief arrangement, called a relief at source scheme, in other pensions. In this kind of scheme, if you pay basic-rate tax at 20%, 80% of your pension contributions come out of your take-home pay after income tax has been taken off.

The pension scheme then claims the tax relief from HM Revenue & Customs (HMRC) each month and pays it back.

HMRC only sends back the basic rate of tax: 20%. Higher or additional-rate taxpayers can claim back the rest of the tax relief from HMRC either by writing to them separately, or through their annual self-assessment tax return.

It is clear from the above that your pension contributions should be taken from your salary before tax is deducted - you need to contact your pay roll department and / or NOW pensions to find out why this is not the case.

Albermarle

The term 'NET pay arrangement ' is in itself confusing, as it actually means contributions are taken from your gross pay. Quite possibly your employer/payroll  has got confused and thinks it means taking contributions from your after tax pay, which is often referred to as Net pay. 

As said you need to highlight this to your employer urgently.