Understanding pension contributions from payslip

reck_uk

Could someone please help me to decipher the pension percentage contributions from the information on the payslip. A friend of mine asked me to take a look and it’s not making a lot of sense to me as when I compare it to mine it’s very easy for me to see my contributions, my employers contributions and what percent of my salary each of those are. The same amounts can then easily be seen on my Aviva pension website after they’ve been paid in.

When I look at his it’s not so clear. He’s got a low salary job with a Nest pension and its setup with minimum payments of 5% for him and 3% for the employer.

I’ve copied the info from his payslip and what it shows on the Nest pension site for the last 3 months below and so could anyone help me to answer the following questions?

• Where it says NEST on his payslip I presume that’s his contribution and then at the bottom of the payslip separate from the rest it says Employers Pension TP which I’m taking to be the employer contribution, does that sound correct?
• Why does the Nest amount not equal 5% of his gross salary and the % amount changes each month?
• Why does the employer’s contribution not equal 3% and changes each month?
• On the Nest website why do the figures in the AMOUNT column (4th from left) not match any of the figures on the payslip?
  
  

Jan 2024

--------------PAY SLIP-----------------------------------------------------------

Gross Pay :£1531.49

TAX: £96.60

National Insurance: £48.35

NEST: £40.46 (2.64% of gross pay)

Net Pay: £1346.08

Employers Pension TP: £30.34 (1.98% of gross pay)

-------------------------------------------------------------------------------------------

Nest website- Contributions

Feb 2024

--------------PAY SLIP-----------------------------------------------------------

Gross Pay:£1478.19

Tax: £86

National Insurance: £43.02

NEST: £38.33 (2.59% of gross pay)

Net Pay: £1310.84

Employers Pension TP: £28.75 (1.94% of gross pay)

-------------------------------------------------------------------------------------------

Nest website- Contributions

March 2024

--------------PAY SLIP-----------------------------------------------------------

Gross Pay:£1563.47

Tax: £103.20

National Insurance: £51.55

NEST: £41.74 (2.66% of gross pay)

 

Net Pay: £1366.98

 

Employers Pension TP: £31.30 (2% of gross pay)

-------------------------------------------------------------------------------------------

Nest website- Contributions

Thanks to anyone that can help.

DE_612183

At a guess I would say it's 3% if he earns say, £2000 - if less there is a sliding scale of the % so that it means he not over contributing compared to his take home.

Maybe worth while checking his contract about pension contributions.

SacredStephan

Payments to Nest are usually calculated on qualifying earnings, based the band of earnings between £520 and £4,189 per month.

Dazed_and_C0nfused

reck_uk said:

Could someone please help me to decipher the pension percentage contributions from the information on the payslip. A friend of mine asked me to take a look and it’s not making a lot of sense to me as when I compare it to mine it’s very easy for me to see my contributions, my employers contributions and what percent of my salary each of those are. The same amounts can then easily be seen on my Aviva pension website after they’ve been paid in.

When I look at his it’s not so clear. He’s got a low salary job with a Nest pension and its setup with minimum payments of 5% for him and 3% for the employer.

I’ve copied the info from his payslip and what it shows on the Nest pension site for the last 3 months below and so could anyone help me to answer the following questions?

• Where it says NEST on his payslip I presume that’s his contribution and then at the bottom of the payslip separate from the rest it says Employers Pension TP which I’m taking to be the employer contribution, does that sound correct?
• Why does the Nest amount not equal 5% of his gross salary and the % amount changes each month?
• Why does the employer’s contribution not equal 3% and changes each month?
• On the Nest website why do the figures in the AMOUNT column (4th from left) not match any of the figures on the payslip?
  
  

Jan 2024

--------------PAY SLIP-----------------------------------------------------------

Gross Pay :£1531.49

TAX: £96.60

National Insurance: £48.35

NEST: £40.46 (2.64% of gross pay)

Net Pay: £1346.08

Employers Pension TP: £30.34 (1.98% of gross pay)

-------------------------------------------------------------------------------------------

Nest website- Contributions

Feb 2024

--------------PAY SLIP-----------------------------------------------------------

Gross Pay:£1478.19

Tax: £86

National Insurance: £43.02

NEST: £38.33 (2.59% of gross pay)

Net Pay: £1310.84

Employers Pension TP: £28.75 (1.94% of gross pay)

-------------------------------------------------------------------------------------------

Nest website- Contributions

March 2024

--------------PAY SLIP-----------------------------------------------------------

Gross Pay:£1563.47

Tax: £103.20

National Insurance: £51.55

NEST: £41.74 (2.66% of gross pay)

 

Net Pay: £1366.98

 

Employers Pension TP: £31.30 (2% of gross pay)

-------------------------------------------------------------------------------------------

Nest website- Contributions

Thanks to anyone that can help.

His contribution appears to be 4%.  And he will get 25% of that added in basic rate tax relief by the pension company, making a gross contribution of 5%.

What you are missing is that the employer is applying the earnings threshold so only deducting pension above the first £520.

You might see that as mean but he can work around it be increasing his percentage.

https://www.thepensionsregulator.gov.uk/en/employers/new-employers/im-an-employer-who-has-to-provide-a-pension/declare-your-compliance/ongoing-duties-for-employers-/earnings-thresholds

Also, the month the pension is shown on his payslip will not necessarily be the same as the month Nest receive it.

If you look closer £38.33 is both a payslip deduction and a pension fund contribution, just different months.

reck_uk

Dazed_and_C0nfused said:

What you are missing is that the employer is applying the earnings threshold so only deducting pension above the first £520.

Is that normal not to include the first £520 when calculating pension contribution, seems a bit stingy when you're already talking about such a low salary.

Dazed_and_C0nfused said:

Also, the month the pension is shown on his payslip will not necessarily be the same as the month Nest receive it.

If you look closer £38.33 is both a payslip deduction and a pension fund contribution, just different months.

£38.33 is shown on the February payslip as a Nest deduction and then shows up on the March Nest statement.

But then January's Nest payment is £40.46 but February's Nest statement shows £40.03. So in this 3 month period only 1 pension payment can be tracked.

molerat

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 2024-2025 the lower limit is £6,240 and the upper limit is £50,270.

https://www.nowpensions.com/employers/learn-about-workplace-pensions/what-is-auto-enrolment/

03747395

How is the 1.8% contribution charge treated. Is it taken from the pension payment made and so entire contribution deductible or is it regarded as something else so the contribution not fully deductible? Logically the amount put in should be deductible even if NEST then appropriates 1.8%.

Marcon

DE_612183 said:

At a guess I would say it's 3% if he earns say, £2000 - if less there is a sliding scale of the % so that it means he not over contributing compared to his take home.

Nothing to do with take home pay. Starting point is always the gross salary.

03747395 said:

How is the 1.8% contribution charge treated. Is it taken from the pension payment made and so entire contribution deductible or is it regarded as something else so the contribution not fully deductible? Logically the amount put in should be deductible even if NEST then appropriates 1.8%.

The 1.8% is a charge levied on all new money contributed by employer and employee. NB: transfers in to NEST are not subject to the initial contribution charge.

JoeCrystal

reck_uk said:

Is that normal not to include the first £520 when calculating pension contribution, seems a bit stingy when you're already talking about such a low salary.

Unfortunately, it's perfectly normal. Indeed, when my employer changed their criteria from based on whole salary to qualifying earnings, they said it was a "good thing" as it meant that low-paid employees could contribute even less!