Bonus Waiver into Pension query

Doctor_Who

Pat38493 said:

HappyHarry said:

thomasfitzgerald369 said:

HappyHarry said:

They are reducing your pay and putting an equivalent amount into your pension.

Thanks happyHarry, I understand as this part of my bonus, but what is meant be "in return and equivalent amount" Are you saying that the "equivalent amount" is my bonus and no other payment is due from them? Thanks

Yes
(filler)

Interesting thread as I guess the wording could be misunderstood, whereas that the employer is actually saying is that just like normal in salary sacrifice, you are waiving your right to the salary (or bonus) in exchange for the employer paying the same amount into your pension.  

The other thing about it though is that if it was as the OP understood, the employer would be doubling the OPs bonus just because they were paying it into their pension, which seems too good to be true and therefore couldn't be the case.

Unfortunately I think the OP has interpreted 'an equivalent amount' one way, but not the way that the employer intended. May be worth raising this misunderstanding with the employer so that they can add some clarification to the wording for other employees. 

Easyjet77

Pat38493 said:

HappyHarry said:

thomasfitzgerald369 said:

HappyHarry said:

They are reducing your pay and putting an equivalent amount into your pension.

Thanks happyHarry, I understand as this part of my bonus, but what is meant be "in return and equivalent amount" Are you saying that the "equivalent amount" is my bonus and no other payment is due from them? Thanks

Yes
(filler)

Interesting thread as I guess the wording could be misunderstood, whereas that the employer is actually saying is that just like normal in salary sacrifice, you are waiving your right to the salary (or bonus) in exchange for the employer paying the same amount into your pension.  

The other thing about it though is that if it was as the OP understood, the employer would be doubling the OPs bonus just because they were paying it into their pension, which seems too good to be true and therefore couldn't be the case.

I cannot see any way whatsoever that could lead to a misunderstanding. Equivalent means exactly that, not in addition or extra or anything else.

artyboy

molerat said:

thomasfitzgerald369 said:

HappyHarry said:

They are reducing your pay and putting an equivalent amount into your pension.

Thanks happyHarry, I understand as this part of my bonus, but what is meant be "in return and equivalent amount" Are you saying that the "equivalent amount" is my bonus and no other payment is due from them? Thanks

Correct.  Unless of course they are willing to pay some of their employer NI saving in as well.

...there's also the (outside) possibility that the employer offers matching of contributions up to a level that the OP hadn't already hit through their 'regular' monthly salary sacrifice contributions. 

But that's very scheme/employer specific so up to the OP to confirm.

Pat38493

Easyjet77 said:

Pat38493 said:

HappyHarry said:

thomasfitzgerald369 said:

HappyHarry said:

They are reducing your pay and putting an equivalent amount into your pension.

Thanks happyHarry, I understand as this part of my bonus, but what is meant be "in return and equivalent amount" Are you saying that the "equivalent amount" is my bonus and no other payment is due from them? Thanks

Yes
(filler)

Interesting thread as I guess the wording could be misunderstood, whereas that the employer is actually saying is that just like normal in salary sacrifice, you are waiving your right to the salary (or bonus) in exchange for the employer paying the same amount into your pension.  

The other thing about it though is that if it was as the OP understood, the employer would be doubling the OPs bonus just because they were paying it into their pension, which seems too good to be true and therefore couldn't be the case.

I cannot see any way whatsoever that could lead to a misunderstanding. Equivalent means exactly that, not in addition or extra or anything else.

On the contrary - I can see that if the person does not understand what salary sacrifice means, and they are very optimistic, they could misunderstand that phrasing, because it says the company will pay the equivalent amount, and they are seeing their part as their bonus and not the company money.

MallyGirl

thomasfitzgerald369 said:

HappyHarry said:

They are reducing your pay and putting an equivalent amount into your pension.

Thanks happyHarry, I understand as this part of my bonus, but what is meant be "in return and equivalent amount" Are you saying that the "equivalent amount" is my bonus and no other payment is due from them? Thanks

I suspect it is a legal wording thing. They can't say 'your bonus' is going in to the pension as it has to be an employer contribution if it is sal sac so they have to say you waive the right to the bonus and they put an amount - equivalent to that bonus you now aren't getting - into the pension

Nebulous2

I can absolutely see where the misunderstanding comes from. Equally, once your brain has seized on a certain expectation, it can be difficult to get it to move on, especially if £1000 (or more) is involved. 

There are two issues:-

1. Understanding that salary sacrifice is a device to save tax, and that it means you sacrifice or give up something, in this case your right to your bonus, though it could also be part of your salary. In return your employer agrees to give you something else which is outside the taxation system normally applied to a salary. It could be a bicycle, or a car, but in this case it is a payment to your pension.

2. The use of the language 'equivalent amount.' Think about synonyms for that. You give up your bonus and your company will pay the same amount into your pension instead. I think that describes what happens in a clearer way. 

Clive_Woody

Pat38493 said:

Easyjet77 said:

Pat38493 said:

HappyHarry said:

thomasfitzgerald369 said:

HappyHarry said:

They are reducing your pay and putting an equivalent amount into your pension.

Thanks happyHarry, I understand as this part of my bonus, but what is meant be "in return and equivalent amount" Are you saying that the "equivalent amount" is my bonus and no other payment is due from them? Thanks

Yes
(filler)

Interesting thread as I guess the wording could be misunderstood, whereas that the employer is actually saying is that just like normal in salary sacrifice, you are waiving your right to the salary (or bonus) in exchange for the employer paying the same amount into your pension.  

The other thing about it though is that if it was as the OP understood, the employer would be doubling the OPs bonus just because they were paying it into their pension, which seems too good to be true and therefore couldn't be the case.

I cannot see any way whatsoever that could lead to a misunderstanding. Equivalent means exactly that, not in addition or extra or anything else.

On the contrary - I can see that if the person does not understand what salary sacrifice means, and they are very optimistic, they could misunderstand that phrasing, because it says the company will pay the equivalent amount, and they are seeing their part as their bonus and not the company money.

The big clue is in the title of the thread "bonus waiver". The bonus is being waived in return for the company paying an equivalent amount into the pension. If you read "equivalent amount" in isolation I could see how a misunderstanding might arise, but in relation to a bonus waiver it seems self explanatory.