No tax relief on my current pension?

Clcatt91

Hello all,

I'm hoping someone on here will be able to give me a hand, because after a lot of google searches I cant seem to find anyone else who has been through this situation.

I work at a small company, about 100 employees, and have done for 4 and a half years. I work full time, on a salary of roughly £36k.

I did a bit of housekeeping last week, double checking I was paying the right amount of tax etc. I spotted I had been roughly paying £200 too much tax every year since I started at the company. After a bit of research, it looks to be due to my pension. 

I have a bog standard pension that I was auto enrolled into (Now pensions, for anyone whose interested). I contribute 5% of my qualifiable earnings, workplace contributes 3%. Now what I didn't realise was that you are supposed to get tax relief on your pension contributions, and this can be done 2 ways (Relief at source, net pay). According to now pensions, their scheme is defined by HMRC as a 'Net pay arrangement' and so the pension contributions should be taken from my gross pay before tax. However, looking at my pay slips, this has not been the case. My gross salary and taxable pay are exactly the same, and according to my pension statements, I have been paying the 5% without tax relief,  and have been for 4 years. 

In total, it looks like I'm missing £950 from my pension due to the missing tax relief. Using the pension calculator on moneyhelper.org.uk essentially confirmed that. If it had been paid correctly, I would have also gained roughly £600 in interest as well, making the total loss roughly £1500. 

As soon as I noticed it, I emailed our company accounts department. However, our payroll is done by a separate company, and so they have forwarded my query to them on my behalf. I cant contact the company personally about my own payslip. Its been over a week and they haven't responded. 

How do I go about rectifying this? I've looked it over multiple times and I don't think I've made an error. I'm definitely paying too much tax, and my pension contributions are too small by the same amount of tax I'm overpaying. 

Any questions please don't hesitate to ask, I will take any help I can get! 

Dazed_and_C0nfused

You don't get any pension tax relief with net pay.

You pay (usually) less income tax instead.

For example if your monthly salary was £3,000 and you contributed 5% to a net pay scheme your payslip would show your taxable earnings were just £2,850.  And you would have avoided paying tax on the £150 pension contribution.

Can you post the details from a recent payslip?

If your employer has been applying the wrong method (not unheard of) then I think it will be down to them to resolve, it won't be something you can sort yourself with HMRC.

Clcatt91

Hello,

Yes I can tell you my most recent pay slip:

Gross pay - £3008.85
Taxable pay - £3008.85
PAYE - £392
Pension £99.55

I'm correct right? They haven't been deducting the pension?

If they have to correct this, will they also make up for the loss of interest?

cloud_dog

You are under a Relief at Source scheme, which means the deduction is 4% with the tax relief (another 1%) being added by the pension provider.

In your provider's pension portal you should see three entries, employee, tax relief, and employer.

Additionally, they are only paying pension contributions based on Qualifying Earnings.

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

Clcatt91

I double checked with my pension provider, they are not a Relief at source scheme, they are a net pay scheme. There is only 2 entries in my portal, my contribution, which is exactly the same amount that is on my payslip, and the workplace contribution. 

Dazed_and_C0nfused

cloud_dog said:

You are under a Relief at Source scheme, which means the deduction is 4% with the tax relief (another 1%) being added by the pension provider.

In your provider's pension portal you should see three entries, employee, tax relief, and employer.

Additionally, they are only paying pension contributions based on Qualifying Earnings.

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

Can you add the link to show Now Pensions operate RAS?

Marcon

Dazed_and_C0nfused said:

cloud_dog said:

You are under a Relief at Source scheme, which means the deduction is 4% with the tax relief (another 1%) being added by the pension provider.

In your provider's pension portal you should see three entries, employee, tax relief, and employer.

Additionally, they are only paying pension contributions based on Qualifying Earnings.

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

Can you add the link to show Now Pensions operate RAS?

It isn't RAS. It's net pay: https://www.nowpensions.com/help-and-support/members/faqs/pension-basics/how-does-tax-relief-work/#:~:text=NOW%3A%20Pensions%20operates%20a%20net,you%20contribute%20to%20your%20pension.

Marcon

Clcatt91 said:

In total, it looks like I'm missing £950 from my pension due to the missing tax relief. Using the pension calculator on moneyhelper.org.uk essentially confirmed that. If it had been paid correctly, I would have also gained roughly £600 in interest as well, making the total loss roughly £1500. 

As soon as I noticed it, I emailed our company accounts department. However, our payroll is done by a separate company, and so they have forwarded my query to them on my behalf. I cant contact the company personally about my own payslip. Its been over a week and they haven't responded. 

You're being unrealistic to complain that you've not had a reply in 'over a week'. Given you've not spotted it for over 4 years, another few weeks or so isn't going to make any difference to the outcome!

If the employer is at fault (or their payroll provider is - if so, it's still for the employer to sort out), then it'll take them some time to sort this out. 

The starting point is that you should be put in the position in which you would have been had things been done correctly. Let them open the batting on that one.

Dazed_and_C0nfused

Marcon said:

Dazed_and_C0nfused said:

cloud_dog said:

You are under a Relief at Source scheme, which means the deduction is 4% with the tax relief (another 1%) being added by the pension provider.

In your provider's pension portal you should see three entries, employee, tax relief, and employer.

Additionally, they are only paying pension contributions based on Qualifying Earnings.

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

Can you add the link to show Now Pensions operate RAS?

It isn't RAS. It's net pay: https://www.nowpensions.com/help-and-support/members/faqs/pension-basics/how-does-tax-relief-work/#:~:text=NOW%3A%20Pensions%20operates%20a%20net,you%20contribute%20to%20your%20pension.

That's what I thought 👍

DE_612183

Clcatt91 said:

Hello,

Yes I can tell you my most recent pay slip:

Gross pay - £3008.85
Taxable pay - £3008.85
PAYE - £392
Pension £99.55

I'm correct right? They haven't been deducting the pension?

If they have to correct this, will they also make up for the loss of interest?

I would say that they are not deducting the pension - this is worrying - have you spoken to any other employees?

I presume they are in the same scheme.

As for rectification, then the money has been invested correctly - what you have got is that you've paid too much tax.

HMRC will have to rectify that - as to interest, I'm not sure if HMRC do that.

What I don't get is that the £99.55 is that the employer pension contribution?

How much is deducted for you - 5% of £3008 is about £150

Clcatt91

Marcon said:

Clcatt91 said:

In total, it looks like I'm missing £950 from my pension due to the missing tax relief. Using the pension calculator on moneyhelper.org.uk essentially confirmed that. If it had been paid correctly, I would have also gained roughly £600 in interest as well, making the total loss roughly £1500. 

As soon as I noticed it, I emailed our company accounts department. However, our payroll is done by a separate company, and so they have forwarded my query to them on my behalf. I cant contact the company personally about my own payslip. Its been over a week and they haven't responded. 

You're being unrealistic to complain that you've not had a reply in 'over a week'. Given you've not spotted it for over 4 years, another few weeks or so isn't going to make any difference to the outcome!

If the employer is at fault (or their payroll provider is - if so, it's still for the employer to sort out), then it'll take them some time to sort this out. 

The starting point is that you should be put in the position in which you would have been had things been done correctly. Let them open the batting on that one.

Okay I shall calm down a bit, I was just so shocked that I had found the mistake in the first place. I shall give them more time to respond. 

It is good to know though that I seem to be correct, that my company have set it up as a RAS scheme, but my pension scheme is a net pay scheme. 

I've spoken to quite a few of my colleagues, and by the sounds of it everyone is in the same boat, so there's potentially over 100 employees pensions they will have to rectify. 

If there's one lesson I've learned from this, it is to check everything! In my 20's I never really gave much thought to my pension. I know I will be keeping a much closer eye on it now! 

I'll keep you all updated once payroll respond.