Company cut payments into my company pension, help.

Exodi

Marcon said:

Exodi said:

Marcon said:

Exodi said:

Marcon said:

Exodi said:

It's pretty incredulous that this 'affects almost everyone in the scheme' and yet seemingly no-one has noticed in two years until now. But then many take pensions seriously I guess.

Presumably if they haven't applied the sacrifice, then you were paid the amount in the your payslip so you are theoretically not worse off (though practically I appreciate you will be miffed you have paid tax, likewise employer miffed they have paid higher employer NI).

I think there's a 'not' missing in your second sentence!

If this was salary sacrifice, OP's salary will have been permanently and contractually reduced, so they won't have been paid a higher salary unless their contract was changed - ie they will have missed out on the employer contribution to the pension scheme, but not had a higher salary (assuming the company understands how salary sacrifice actually works, even if the implementation went wrong in terms of pension contributions).

Thanks, updated the first sentence - if only every one took pensions seriously!

If their salary was reduced the correct amount then it certainly makes the issue simpler to resolve at least (though bad for the company realising they've underpaid their staff for 2 years!). As an aside, at least in my experience with salary sacrifice, I'm the one informing the pension provider how much to 'take' via DD instruction (though this needs to be signed off, of course).

How would the employer go about reducing the salary sacrifice DD's without their employees knowledge or consent? Is a 'workplace salary sacrifice scheme' such a thing?

In a 'normal'(!) salary sacrifice arrangement, the overall monthly payment amount (whether by DD, BACS transfer or however the employer makes payment to the provider) is between the employer and the pension provider. Employees wouldn't know or have to agree the amount, because it's already been contractually established what their salary will be and how much they are sacrificing. If the employer messes up - as they have done here - it comes to light when either the employee or the employer wakes up and spots there's been an error.

I'm not too sure how your rather informal arrangement would be viewed by HMRC if it ever came to light, but maybe you are one of the 'exceptions'. See https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye and note particularly:

As a general rule, if an employee swaps between cash earnings and a non-cash benefit whenever they like, any expected tax and National Insurance contributions advantages under a salary sacrifice arrangement will not apply. There are some exceptions to this, Employment Income Manual 42755 gives more information.

Thanks, that's useful - I'm a company director but realise that my set up appears to be more the exception than the norm. I can make card payments in Vanguard as the employer, logged into my personal account so nothing to suggest it's untoward (I hope).

Thanks for the info though, it sounds very likely that the OP has had their pay deducted, but equivalent pension payment not made (which is a much simpler issue to resolve).

If you're a company director then hopefully it's simply a company contribution on your behalf (which is entirely the norm) and nothing to do with actual salary sacrifice - but you might just have a quick look at your terms of employment to make sure that's the case.

It is salary sacrifice -

The directors will email payroll "FYI I'm updating my SS - please deduct X off my salary, meaning X+Y(Employer Contribution)+Z(Employer NI) will be my new pension contribution going forward".

They'll then either update their DD, or in my case login into Vanguard and pay by card, with the new amount.

Is there an issue here? We can act in the capacity of the employer changing our SS arrangement.

Our accountant hasn't raised any issues but interested if you think there's anything untoward with the arrangement that we might need to look into?

There are no contractual terms around salary sacrifice.

LHW99

OP do you have an (original) employment contract that spells out the pension arrangements? Even if 20 years old, that should be the essence of pension payment amounts, provided it has not been updated.

Marcon

Exodi said:

Marcon said:

Exodi said:

Marcon said:

Exodi said:

Marcon said:

Exodi said:

It's pretty incredulous that this 'affects almost everyone in the scheme' and yet seemingly no-one has noticed in two years until now. But then many take pensions seriously I guess.

Presumably if they haven't applied the sacrifice, then you were paid the amount in the your payslip so you are theoretically not worse off (though practically I appreciate you will be miffed you have paid tax, likewise employer miffed they have paid higher employer NI).

I think there's a 'not' missing in your second sentence!

If this was salary sacrifice, OP's salary will have been permanently and contractually reduced, so they won't have been paid a higher salary unless their contract was changed - ie they will have missed out on the employer contribution to the pension scheme, but not had a higher salary (assuming the company understands how salary sacrifice actually works, even if the implementation went wrong in terms of pension contributions).

Thanks, updated the first sentence - if only every one took pensions seriously!

If their salary was reduced the correct amount then it certainly makes the issue simpler to resolve at least (though bad for the company realising they've underpaid their staff for 2 years!). As an aside, at least in my experience with salary sacrifice, I'm the one informing the pension provider how much to 'take' via DD instruction (though this needs to be signed off, of course).

How would the employer go about reducing the salary sacrifice DD's without their employees knowledge or consent? Is a 'workplace salary sacrifice scheme' such a thing?

In a 'normal'(!) salary sacrifice arrangement, the overall monthly payment amount (whether by DD, BACS transfer or however the employer makes payment to the provider) is between the employer and the pension provider. Employees wouldn't know or have to agree the amount, because it's already been contractually established what their salary will be and how much they are sacrificing. If the employer messes up - as they have done here - it comes to light when either the employee or the employer wakes up and spots there's been an error.

I'm not too sure how your rather informal arrangement would be viewed by HMRC if it ever came to light, but maybe you are one of the 'exceptions'. See https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye and note particularly:

As a general rule, if an employee swaps between cash earnings and a non-cash benefit whenever they like, any expected tax and National Insurance contributions advantages under a salary sacrifice arrangement will not apply. There are some exceptions to this, Employment Income Manual 42755 gives more information.

Thanks, that's useful - I'm a company director but realise that my set up appears to be more the exception than the norm. I can make card payments in Vanguard as the employer, logged into my personal account so nothing to suggest it's untoward (I hope).

Thanks for the info though, it sounds very likely that the OP has had their pay deducted, but equivalent pension payment not made (which is a much simpler issue to resolve).

If you're a company director then hopefully it's simply a company contribution on your behalf (which is entirely the norm) and nothing to do with actual salary sacrifice - but you might just have a quick look at your terms of employment to make sure that's the case.

It is salary sacrifice -

The directors will email payroll "FYI I'm updating my SS - please deduct X off my salary, meaning X+Y(Employer Contribution)+Z(Employer NI) will be my new pension contribution going forward".

They'll then either update their DD, or in my case login into Vanguard and pay by card, with the new amount.

Is there an issue here? We can act in the capacity of the employer changing our SS arrangement.

Our accountant hasn't raised any issues but interested if you think there's anything untoward with the arrangement that we might need to look into?

There are no contractual terms around salary sacrifice.

Does your accountant know what you're doing? No bad idea to explain to them and get them to confirm, because on the face of it it's not clear to me that your company is running an effective SS scheme:

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42760

'Salary sacrifice arrangements are effective when the contractual right to cash remuneration has been reduced. For this to happen two conditions have to be met:

• the employment contract must be effectively varied before the changes are implemented. Any right to receive cash wages/salary must be given up before the employee is entitled to receive the remuneration. See EIM42765 for more detail
• the true construction of the revised contractual arrangement between employer and employee must be that the employee is entitled to lower cash remuneration and a benefit, see EIM42766 for more detail.'

QrizB

LHW99 said:

OP do you have an (original) employment contract that spells out the pension arrangements? Even if 20 years old, that should be the essence of pension payment amounts, provided it has not been updated.

I was about to write something similar.

If the OP has paperwork from 20 years ago setting out how the salsac arrangement was going to work, including that the employer was going to contribute an amount equivalent to the NI they'd otherwise have been liable for, then it'll be for the employer to show that they've subsequently changed this.

OP are you in a union? Does your workplace have a recognised union? TUs generally have very good pension teams, often more clued up than the employer. 

leosayer

LHW99 said:

OP do you have an (original) employment contract that spells out the pension arrangements? Even if 20 years old, that should be the essence of pension payment amounts, provided it has not been updated.

I said a similar thing earlier. We don't know for sure this is a mistake.

Maybe the company were previously paying more than contracted and have brought it back to where it should be.

Without knowing the precise contribution arrangements and comparing them to what is being paid now, we don't know whether the OP is losing out. If the OP missed a reduced contribution for 2 years, maybe they also missed the comms about the reduction.

This may be why the company have asked the OP not to communicate to colleagues - to avoid panicking people unnecessarily.

Hoenir

leosayer said:

LHW99 said:

OP do you have an (original) employment contract that spells out the pension arrangements? Even if 20 years old, that should be the essence of pension payment amounts, provided it has not been updated.

I said a similar thing earlier. We don't know for sure this is a mistake.

Maybe the company were previously paying more than contracted and have brought it back to where it should be.

Without knowing the precise contribution arrangements and comparing them to what is being paid now, we don't know whether the OP is losing out. If the OP missed a reduced contribution for 2 years, maybe they also missed the comms about the reduction.

This may be why the company have asked the OP not to communicate to colleagues - to avoid panicking people unnecessarily.

Rates of employer's national insurance have increased over the years. Last increase being this April. Could add a considerable cost burden on the company 

Inspector_Gizmo

Hoenir said:

Inspector_Gizmo said:

I know that the company used to pay the saved NI into my pension, which many companies don't, 

Is this the crux of the issue. Was this arrangement ever contractually formalised? Or was it discretionary on the part of the employer. 

Yes I have a letter countersigned by me in October 2009 saying that they would pay, and I quote "In return we will make an additional pension contribution of £x on your behalf to the X Pension scheme form the above date.   This is the gross amount of your salary sacrifice plus 12.8% (the amount of National Insurance we will not have to pay as a result of the sacrifice)

DRS1

Does that mean they agreed to pay a flat amount of money to the pension not a percentage of your pre-sacrifice salary?  So if you got a pay rise the pension contribution would stay the same?

Inspector_Gizmo

DRS1 said:

Does that mean they agreed to pay a flat amount of money to the pension not a percentage of your pre-sacrifice salary?  So if you got a pay rise the pension contribution would stay the same?

No as there is the statutory pension contribution as well which is split 3% employee and 5% employer so that as I have had salary increases over that period, the contributions to my pension have gone up.  Of course there is also a nagging doubt in my mind, that if the company over contributed in the past by mistake, will they try and claw that back?

Inspector_Gizmo

QrizB said:

LHW99 said:

OP do you have an (original) employment contract that spells out the pension arrangements? Even if 20 years old, that should be the essence of pension payment amounts, provided it has not been updated.

I was about to write something similar.

If the OP has paperwork from 20 years ago setting out how the salsac arrangement was going to work, including that the employer was going to contribute an amount equivalent to the NI they'd otherwise have been liable for, then it'll be for the employer to show that they've subsequently changed this.

OP are you in a union? Does your workplace have a recognised union? TUs generally have very good pension teams, often more clued up than the employer. 

Hi, not in a union.  We are only a small company (less than 15) in the UK though part of an international entity.  It is a thought though