Company Pension Contributions Being Paid on Gross Salary Minus £6240

WSB

Discovered recently that my wife's employer who contributes 3% into her pension scheme is not paying this 3% on her yearly gross salary but on 3% of her gross salary minus £6240.

Apparently, the employer is allowed to do this due to some rules.
We always thought company pension contributions were based on a % of gross yearly salary, so are a bit surprised by this.

Could someone please shed some light on this please?

Many Thanks

FIREDreamer

WSB said:

Discovered recently that my wife's employer who contributes 3% into her pension scheme is not paying this 3% on her yearly gross salary but on 3% of her gross salary minus £6240.

Apparently, the employer is allowed to do this due to some rules.
We always thought company pension contributions were based on a % of gross yearly salary, so are a bit surprised by this.

Could someone please shed some light on this please?

Many Thanks

Perfectly legal. However it indicates that your wife has a mean employer.

WSB

FIREDreamer said:

WSB said:

Discovered recently that my wife's employer who contributes 3% into her pension scheme is not paying this 3% on her yearly gross salary but on 3% of her gross salary minus £6240.

Apparently, the employer is allowed to do this due to some rules.
We always thought company pension contributions were based on a % of gross yearly salary, so are a bit surprised by this.

Could someone please shed some light on this please?

Many Thanks

Perfectly legal. However it indicates that your wife has a mean employer.

Gathered it was legal and yes he is mean.  Even pays the minimum mileage allowance for company business but that's another story.
Can you give some explanation though.

wolvoman

WSB said:

FIREDreamer said:

WSB said:

Discovered recently that my wife's employer who contributes 3% into her pension scheme is not paying this 3% on her yearly gross salary but on 3% of her gross salary minus £6240.

Apparently, the employer is allowed to do this due to some rules.
We always thought company pension contributions were based on a % of gross yearly salary, so are a bit surprised by this.

Could someone please shed some light on this please?

Many Thanks

Perfectly legal. However it indicates that your wife has a mean employer.

Gathered it was legal and yes he is mean.  Even pays the minimum mileage allowance for company business but that's another story.
Can you give some explanation though.

Part of the Pension Act 2008 (and subsequent Government actions) related to automatic enrolment.

Employers have to pay in a minimum of 3% of salary between £6,240 and £50,270. 

It’s not great for low or higher earners.
Actually it’s not great for anyone as 3% is peanuts.

WSB

wolvoman said:

WSB said:

FIREDreamer said:

WSB said:

Discovered recently that my wife's employer who contributes 3% into her pension scheme is not paying this 3% on her yearly gross salary but on 3% of her gross salary minus £6240.

Apparently, the employer is allowed to do this due to some rules.
We always thought company pension contributions were based on a % of gross yearly salary, so are a bit surprised by this.

Could someone please shed some light on this please?

Many Thanks

Perfectly legal. However it indicates that your wife has a mean employer.

Gathered it was legal and yes he is mean.  Even pays the minimum mileage allowance for company business but that's another story.
Can you give some explanation though.

Part of the Pension Act 2008 (and subsequent Government actions) related to automatic enrolment.

Employers have to pay in a minimum of 3% of salary between £6,240 and £50,270. 

It’s not great for low or higher earners.
Actually it’s not great for anyone as 3% is peanuts.

Thanks,
Yes, she certainly has a crap deal.
With this type of pension, would she be able to increase her pension contributions from the nominal 5%?

molerat

It is called qualifying earnings and they only need to pay their contribution for those earning in excess of £10K on earnings between £6240 and £50270, that is the legislation.  You may also find that her deduction is only 4% of her qualifying earnings, the 25% tax uplift added by the pension provider takes that up to 5%.

WSB

molerat said:

It is called qualifying earnings and they only need to pay their contribution for those earning in excess of £10K on earnings between £6240 and £50270, that is the legislation.  You may also find that her deduction is only 4% of her qualifying earnings, the 25% tax uplift added by the pension provider takes that up to 5%.

Yes, although it says she pays 5%, the actual payments from her going in are less.
We would like to increase her contributions, if that's possible?

TheSpectator

WSB said:

FIREDreamer said:

WSB said:

Discovered recently that my wife's employer who contributes 3% into her pension scheme is not paying this 3% on her yearly gross salary but on 3% of her gross salary minus £6240.

Apparently, the employer is allowed to do this due to some rules.
We always thought company pension contributions were based on a % of gross yearly salary, so are a bit surprised by this.

Could someone please shed some light on this please?

Many Thanks

Perfectly legal. However it indicates that your wife has a mean employer.

Gathered it was legal and yes he is mean.  Even pays the minimum mileage allowance for company business but that's another story.
Can you give some explanation though.

An employer does not have to pay any mileage.

ali_bear

WSB said:

We would like to increase her contributions, if that's possible?

Should be possible. Just have to ask the payroll department to make the necessary arrangement. Is it through the salary sacrifice route?

WSB

ali_bear said:

WSB said:

We would like to increase her contributions, if that's possible?

Should be possible. Just have to ask the payroll department to make the necessary arrangement. Is it through the salary sacrifice route?

I guess it's thr salary sacrifice route. 
What other options are there?
My understanding is that salary sacrifice just means they deduct the pension contributions before applying the tax. 
Is that not the same for all pension contributions? 

DullGreyGuy

WSB said:

FIREDreamer said:

WSB said:

Discovered recently that my wife's employer who contributes 3% into her pension scheme is not paying this 3% on her yearly gross salary but on 3% of her gross salary minus £6240.

Apparently, the employer is allowed to do this due to some rules.
We always thought company pension contributions were based on a % of gross yearly salary, so are a bit surprised by this.

Could someone please shed some light on this please?

Many Thanks

Perfectly legal. However it indicates that your wife has a mean employer.

 Even pays the minimum mileage allowance for company business but that's another story.

There is no minimum, they dont have to pay anything. HMRC sets a maximum that can be claimed without evidence that your particular costs are higher. Never had an employer that paid more than the HMRC standard