Employers NI on pension contributions?

hallmark

My guess is that this could be introduced but at a lower rate, maybe 5% to begin with. That gives companies room to manoeuvre and it can be raised subsequently.

Grumpy_chap

Are there additional complexities in applying employer NI to employer pension contributions?

The value of contributions is easy to define in the case of DC pensions but less so in the case of DB pensions.
It seems unlikely that the application of employer NI would be applied differently for employer contributions to DB pensions than to DC schemes.

intalex

I believe employers currently benefit from employer NI saving on minimum 8% of employee salary since that is the minimum required contribution into pensions (3% from employer + 5% from employee). Any contributions above this level are at the discretion of the employee (plus any additional matching at the discretion of the employer), and only if employees opt to make additional contributions via salary sacrifice would the employer benefit from further employer NI saving - any contributions made by employee after receiving net pay would have already cost the employer the respective employer NI. So to me it doesn't sound like an unfair change if the employer (stops saving and) starts incurring employer NI on the corresponding "gross" pay irrespective of how much the employee chooses to contribute to their pension either via salary sacrifice or from net pay.

Not sure how many employers pass on employer NI saving from salary sacrifice on to employee pension pots, but that's the only scenario where employers can stay cost neutral and employees lose out.

Albermarle

hallmark said:

My guess is that this could be introduced but at a lower rate, maybe 5% to begin with. That gives companies room to manoeuvre and it can be raised subsequently.

That would be my bet .

gt94sss2

Grumpy_chap said:

Are there additional complexities in applying employer NI to employer pension contributions?

The value of contributions is easy to define in the case of DC pensions but less so in the case of DB pensions.
It seems unlikely that the application of employer NI would be applied differently for employer contributions to DB pensions than to DC schemes.

I suspect such a charge would destroy any remaining DB schemes left in the private sector after Gordon Browns tax change on dividends.

masonic

intalex said:

I believe employers currently benefit from employer NI saving on minimum 8% of employee salary since that is the minimum required contribution into pensions (3% from employer + 5% from employee).

Unless payments are made via salary sacrifice, the 5% employee contribution would be net of employer/employee NI. Salary sacrifice transforms an employee contribution to an employer contribution and therefore it isn't subject to NI.

ZeroSum

gt94sss2 said:

Grumpy_chap said:

Are there additional complexities in applying employer NI to employer pension contributions?

The value of contributions is easy to define in the case of DC pensions but less so in the case of DB pensions.
It seems unlikely that the application of employer NI would be applied differently for employer contributions to DB pensions than to DC schemes.

I suspect such a charge would destroy any remaining DB schemes left in the private sector after Gordon Browns tax change on dividends.

Hardly, vast majority of DB schemes are public sector which aren't done via salary sacrifice anyway and already pay NI conts

intalex

masonic said:

intalex said:

I believe employers currently benefit from employer NI saving on minimum 8% of employee salary since that is the minimum required contribution into pensions (3% from employer + 5% from employee).

Unless payments are made via salary sacrifice, the 5% employee contribution would be net of employer/employee NI. Salary sacrifice transforms an employee contribution to an employer contribution and therefore it isn't subject to NI.

Right, so currently the only real guaranteed cost saving to the employer is the employer NI on the minimum 3% they are required to contribute as employer contributions, anything extra is at the discretion of an employee opting into salary sacrifice, which an employee would primarily do to (i) save themselves employee NI, and (ii) possibly avoid the admin of having to do a tax return to claim more tax relief.

So technically, salary sacrifice, which though entirely an employee prerogative, actually benefits employers more in absolute values than the employees opting for it. I've yet to see an employer passing that saving into the employee's pension pot, even if I've read that some employers do this.

So it does beg the question why employers deserve to benefit from this saving at all just because an employee takes measures to optimise their pension contributions. It's a bit of a freebie to employers for not really adding any value to anyone in return, except the (presumably few) employers who either pass on the saving into the respective employee's pension or use the saving to fund contribution matching incentive above the minimum 3% level.

masonic

Some employers like salary sacrifice so much that it is the only way for employees to pay into their workplace scheme. Mine, for example, does not have a net pay arrangement available. I can understand that, though, just on the basis of reducing complexity.

sausage_time

intalex said:

masonic said:

intalex said:

I believe employers currently benefit from employer NI saving on minimum 8% of employee salary since that is the minimum required contribution into pensions (3% from employer + 5% from employee).

Unless payments are made via salary sacrifice, the 5% employee contribution would be net of employer/employee NI. Salary sacrifice transforms an employee contribution to an employer contribution and therefore it isn't subject to NI.

Right, so currently the only real guaranteed cost saving to the employer is the employer NI on the minimum 3% they are required to contribute as employer contributions, anything extra is at the discretion of an employee opting into salary sacrifice, which an employee would primarily do to (i) save themselves employee NI, and (ii) possibly avoid the admin of having to do a tax return to claim more tax relief.

So technically, salary sacrifice, which though entirely an employee prerogative, actually benefits employers more in absolute values than the employees opting for it. I've yet to see an employer passing that saving into the employee's pension pot, even if I've read that some employers do this.

So it does beg the question why employers deserve to benefit from this saving at all just because an employee takes measures to optimise their pension contributions. It's a bit of a freebie to employers for not really adding any value to anyone in return, except the (presumably few) employers who either pass on the saving into the respective employee's pension or use the saving to fund contribution matching incentive above the minimum 3% level.

I've worked for two employers who passed on the employer NI savings as a result of salary sacrifice.