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Pension contribution amount based on pay rise.
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SneakySpectator
Posts: 333 Forumite

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?
Or does it not work out this way?
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Comments
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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.0
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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,1 -
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,
Why should it matter to my employer how much I am contributing?0 -
SneakySpectator 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?
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'.Know what you don't1 -
Exodi said:SneakySpectator 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?
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'.0 -
SneakySpectator 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,
Why should it matter to my employer how much I am contributing?
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).
Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!0 -
SneakySpectator said:Exodi said:SneakySpectator 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?
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'.0
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