Pension

Findtruth12345

My company operate a pension scheme where by my pension is calculated not on my salary but by the average salary in the company. Is this legal?  Help appreciated.

Silvertabby

Findtruth12345 said:

My company operate a pension scheme where by my pension is calculated not on my salary but by the average salary in the company. Is this legal?  Help appreciated.

Probably.  The Armed Forces AFPS75 was based on one notional pay for each rank, rather than actual salary.  

But are you really saying that your company uses the average salary based on ALL employees - because that sounds both extreme and possibly very expensive! 

MarkCarnage

Is it possible that the OP means career average salary here? Sounds like it is Defined Benefit too. Would be useful for the OP to clarify. 

Findtruth12345

Yes it is all employees. I work for a company with around 3000 employees. The vast majority are min wage workers. The company pay employer contributions of 3% on the average salary of those 3000 employees not on my salary (which is higher than the average of the 3000). 

dunstonh

Findtruth12345 said:

My company operate a pension scheme where by my pension is calculated not on my salary but by the average salary in the company. Is this legal?  Help appreciated.

Is it possible you are have mistaken a CARE scheme and how it averages?  (CARE means there is averaging but not of the whole workforce but you specifically).

I cannot recall coming across any other averaging method other than what Silvertabby mentions and CARE schemes.    So, maybe you could name the company?    A scheme like that would be a big company so you wouldn't have to fear being identified.

Marcon

Findtruth12345 said:

Yes it is all employees. I work for a company with around 3000 employees. The vast majority are min wage workers. The company pay employer contributions of 3% on the average salary of those 3000 employees not on my salary (which is higher than the average of the 3000). 

It's legal provided the employer contributions made for each individual employee (including those who earn more than the 'average') meet minimum auto enrolment requirements. 

The current minimum contributions of 3% from the employer usually applies to what you earn between £6,240 and £50,270 during the 2024/25 tax year - your 'qualifying earnings'.

What are your personal contributions based on?

xylophone

Are you in an auto enrolment scheme?

Presumably there is some sort of scheme guide.What exactly does it say on the basis on which contributions are calculated?

https://www.gov.uk/workplace-pensions/what-you-your-employer-and-the-government-pay

https://www.thepensionsregulator.gov.uk/en/employers/new-employers/im-an-employer-who-has-to-provide-a-pension/choose-a-pension-scheme/understanding-your-costs/making-contributions-to-your-pension-scheme-#:~:text=However, by law, you and,can choose to pay more.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/automatic-enrolment-an-introduction

dunstonh

Findtruth12345 said:

Yes it is all employees. I work for a company with around 3000 employees. The vast majority are min wage workers. The company pay employer contributions of 3% on the average salary of those 3000 employees not on my salary (which is higher than the average of the 3000). 

Can you name the company please?   It will help us look it up. 

However, what you have described in this post is not the same as you have described in the first post.     This one says the employer contribution is 3% of the average salary.     As a defined benefit scheme (which is what you are describing) the employer contribution is largely notional.   Some years they will have to pay more than others but it doesn't matter what the employer pays as long as the scheme is solvent.  (simplified explanation).

Only on defined contribution schemes does it matter what the employer pays but your first post indicates it is not a defined contribution scheme.