Company Pension Contributions Being Paid on Gross Salary Minus £6240

bjorn_toby_wilde

WSB said:

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? 

No

Essentially Salary sacrifice is where you give up a portion of your salary, which is paid directly into your pension before the deduction of income tax and National Insurance.

The other option is that the contributions are made before tax but after NI has been deducted.

Sal Sac is usually a better option for both employees and employers.

Marcon

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.

Good explanation here, which applies to everyone, not just NEST members: https://www.nestpensions.org.uk/schemeweb/helpcentre/contributions/calculating-contributions/calculate-contributions-using-qualifying-earnings.html

Albermarle

bjorn_toby_wilde said:

WSB said:

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? 

No

Essentially Salary sacrifice is where you give up a portion of your salary, which is paid directly into your pension before the deduction of income tax and National Insurance.

The other option is that the contributions are made before tax but after NI has been deducted.

Sal Sac is usually a better option for both employees and employers.

The third option is that contributions are taken out after tax and NI . In this case the pension provider adds basic rate tax relief.

OP - She should be able to increase her contributions, regardless of how her employer takes the contributions, and she will get the same tax relief either way. Salary sacrifice also gives a NI benefit, but it is the employer choice which method they use. 

If she ever changes to a new employer, it is worth noting that many will pay their % on the whole salary.
Bigger employers will also often add significantly more than 3 %, and even some smaller employers may add a bit more.

squirrelpie

Given how mean her employer seems, if you want to save more into her pension I'd be inclined to do it separately into a SIPP. That way it has nothing to do with her employer and is entirely under her control.

Dazed_and_C0nfused

DullGreyGuy 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.

 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 

I think the NHS does, albeit not for unlimited mileage (or even for the first 10,000 miles).

Albermarle

squirrelpie said:

Given how mean her employer seems, if you want to save more into her pension I'd be inclined to do it separately into a SIPP. That way it has nothing to do with her employer and is entirely under her control.

It depends on the way the pension is arranged.
If it as an auto enrolment one like Nest ( or similar) then the employer has little/no influence over it.
Similar if it is a Group Personal Pension.

WSB

bjorn_toby_wilde said:

WSB said:

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? 

No

Essentially Salary sacrifice is where you give up a portion of your salary, which is paid directly into your pension before the deduction of income tax and National Insurance.

The other option is that the contributions are made before tax but after NI has been deducted.

Sal Sac is usually a better option for both employees and employers.

Thank you, that makes sense.

Grumpy_chap

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.

There is no minimum mileage rate.  If she is paid less than the HMRC allowances, she can claim tax relief on the difference.

Given she is not best enamoured with the employer and assuming the employer doesn't offer salary sacrifice, she may be better to have additional pension contributions into a SIPP unrelated to the employer.

LHW99

Also having a SIpp would mean that if she changes jobs, she has the choice to transfer the current employment's fund to her Sipp (assuming it is DC), or move it to a new employer's pension platform.