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Company Pension Contributions Being Paid on Gross Salary Minus £6240

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
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Comments

  • 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
    WSB Posts: 160 Forumite
    Seventh Anniversary 100 Posts
    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
    wolvoman Posts: 1,178 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    WSB 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
    WSB Posts: 160 Forumite
    Seventh Anniversary 100 Posts
    wolvoman said:
    WSB 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
    molerat Posts: 33,554 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    edited 12 December 2024 pm31 10:37PM
    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
    WSB Posts: 160 Forumite
    Seventh Anniversary 100 Posts
    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?
  • WSB 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.
  • 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?
    A little FIRE lights the cigar
  • WSB
    WSB Posts: 160 Forumite
    Seventh Anniversary 100 Posts
    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? 
  • WSB 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 
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