Pension contribution amount based on pay rise.

[Deleted User]

I currently earn £2,200 before tax, I contribute 15% of my salary and my employer contributes 7.5%. Currently this equates to £495 per month going into my pension. If I get a 5% pay rise, will this directly increase my pension by 5%? So £495 per month becomes £519.75? 

Or does it not work out this way?

la531983

Nobody will likely be able to answer as some organisations may change the %age of pension contributions based on how much you get paid (mine does), its possible the pay rise puts you into a new band, you would have to ask your HR team or find the relevant policy. 

artyboy

We can't see how your company operates its pension scheme from over here... have you looked at the scheme documentation?

Normally if you are contributing based on a chosen percentage, that will flex according to changes in your salary, but of course it's always possible that your employer may cap your or their contribution in absolute terms, 

[Deleted User]

artyboy said:

We can't see how your company operates its pension scheme from over here... have you looked at the scheme documentation?

Normally if you are contributing based on a chosen percentage, that will flex according to changes in your salary, but of course it's always possible that your employer may cap your or their contribution in absolute terms, 

Their contribution is capped at 7.5% of my salary, I'm pretty sure it's illegal to for your company to cap YOUR contribution? It makes no difference to my employer whether I'm contributing 0% or 50%, as long as I don't fall under the minimum wage right? 

Why should it matter to my employer how much I am contributing? 

Exodi

[Deleted User] said:

I currently earn £2,200 before tax, I contribute 15% of my salary and my employer contributes 7.5%. Currently this equates to £495 per month going into my pension. If I get a 5% pay rise, will this directly increase my pension by 5%? So £495 per month becomes £519.75? 

Or does it not work out this way?

In theory, but others have said, you should confirm with the relevant policy.

Also I note you say you get 22.5% = employee 15% + employer 7.5%, which £2200*0.225 = £495, as you say.

Legally, employers are only obliged to make pension contributions on 'qualifying earnings', which are basically earnings between the Lower Earnings Limit (LEL) and the Upper Earnings Limit (UEL). Currently, this is £542 - £4,189 when considered on a monthly basis. What this means is legally your employer would only need to pay a contribution on £2200-£542 = £1,658, though some pay it on the whole amount at their discretion.

Personally if you're looking into 'pension stuff' I'd confirm that you are receiving contributions based on the whole gross amount as you suggest, or on just your 'qualifying earnings'.

[Deleted User]

Exodi said:

[Deleted User] said:

I currently earn £2,200 before tax, I contribute 15% of my salary and my employer contributes 7.5%. Currently this equates to £495 per month going into my pension. If I get a 5% pay rise, will this directly increase my pension by 5%? So £495 per month becomes £519.75? 

Or does it not work out this way?

In theory, but others have said, you should confirm with the relevant policy.

Also I note you say you get 22.5% = employee 15% + employer 7.5%, which £2200*0.225 = £495, as you say.

Legally, employers are only obliged to make pension contributions on 'qualifying earnings', which are basically earnings between the Lower Earnings Limit (LEL) and the Upper Earnings Limit (UEL). Currently, this is £542 - £4,189 when considered on a monthly basis. What this means is legally your employer would only need to pay a contribution on £2200-£542 = £1,658, though some pay it on the whole amount at their discretion.

Personally if you're looking into 'pension stuff' I'd confirm that you are receiving contributions based on the whole gross amount as you suggest, or on just your 'qualifying earnings'.

Thanks, just sent HR an email to clarify. 

Marcon

[Deleted User] said:

artyboy said:

We can't see how your company operates its pension scheme from over here... have you looked at the scheme documentation?

Normally if you are contributing based on a chosen percentage, that will flex according to changes in your salary, but of course it's always possible that your employer may cap your or their contribution in absolute terms, 

Their contribution is capped at 7.5% of my salary, I'm pretty sure it's illegal to for your company to cap YOUR contribution? It makes no difference to my employer whether I'm contributing 0% or 50%, as long as I don't fall under the minimum wage right? 

Why should it matter to my employer how much I am contributing? 

Nothing illegal about it. Many companies don't allow employees to chop and change their contribution rates for purely administrative reasons.

That's especially true where salary sacrifice is concerned - and it's not clear from your posts whether that's the route your employer uses? Minimum wage considerations only apply to contributions made by salary sacrifice - not to true 'personal' contributions (ie deducted directly from your earnings). 

Cobbler_tone

[Deleted User] said:

Exodi said:

[Deleted User] said:

I currently earn £2,200 before tax, I contribute 15% of my salary and my employer contributes 7.5%. Currently this equates to £495 per month going into my pension. If I get a 5% pay rise, will this directly increase my pension by 5%? So £495 per month becomes £519.75? 

Or does it not work out this way?

In theory, but others have said, you should confirm with the relevant policy.

Also I note you say you get 22.5% = employee 15% + employer 7.5%, which £2200*0.225 = £495, as you say.

Legally, employers are only obliged to make pension contributions on 'qualifying earnings', which are basically earnings between the Lower Earnings Limit (LEL) and the Upper Earnings Limit (UEL). Currently, this is £542 - £4,189 when considered on a monthly basis. What this means is legally your employer would only need to pay a contribution on £2200-£542 = £1,658, though some pay it on the whole amount at their discretion.

Personally if you're looking into 'pension stuff' I'd confirm that you are receiving contributions based on the whole gross amount as you suggest, or on just your 'qualifying earnings'.

Thanks, just sent HR an email to clarify. 

Best to check but you explained how exactly it happens in my world. I put 48%, company puts 12% and taken from gross salary via SS. I get 2% pay rise and they contributions increase accordingly. If your contributions take you below the minimum wage threshold then HR are the first to tell you.