NEST pension confusion

Bumblingbee

Hi All

I'm hoping someone can help me as I'm going round in circles, my husband works for a company consisting of him and the owner and his accountant has set up NEST through his accountant. They are both meant to pay 6% contributions and I have been unable to make it work. Probably a lack of understanding on my behalf but hoping someone can help me. 

His salary £60,000
Employer and Employee contributions should both be 6%
From what I can see its not set up as salary sacrifice so will receive 20% tax relief following receipt of money in NEST.

Based on the payslip I don't believe either is paying a 6% contribution? My husband has queried this and has been assured he is. Top picture is the transactions on NEST and below his payslip. I'd be grateful for feedback. Thanks

rjmachin

This is with the help of AI, but it seems to be correct and matches your payslip

First there is "Qualifying earnings", which some use to only calculate pension contributions above a lower earnings limit (LEL) from £520 per month and an upper earning limit (UEL) from £4189 per month.  Amounts above/below these are ignored.

Then Nest is net pay, so they claim 20% from HMRC

Item	Calculation	Amount
Qualifying earnings	£4,189 − £520	£3,669.00
Employee rate	6%
Gross contribution	£3,669 × 6%	£220.14
Net paid by you (80%)	£220.14 × 80%	£176.11
Rounding by payroll	+£0.01	£176.12

Bumblingbee

You have saved me a lot of time thank you! The intention and contractual agreement is that it would be 6% on all earnings, so we can go back and try and get that rectified.

Thank you so much 

Albermarle

Bumblingbee said:

You have saved me a lot of time thank you! The intention and contractual agreement is that it would be 6% on all earnings, so we can go back and try and get that rectified.

Thank you so much 

From my limited experience most decent companies ignore these qualifying earnings limits and just pay on the full amount, although clearly some employers will save every penny they can.
I think the lower limit in particular is up for review as it is particularly unfair on lower paid workers.
On a salary of £5000, the employer should pay £300 ( if the contract is clear that the 6% should be on all earnings) and the employee £240 from their after tax pay, and Nest would claim £60 basic rate tax relief for them and add it on.
Of course there would be nothing to stop the employee increasing their contribution higher than 6%, to have more going into the pension each month .

rjmachin

Albermarle said:

Bumblingbee said:

You have saved me a lot of time thank you! The intention and contractual agreement is that it would be 6% on all earnings, so we can go back and try and get that rectified.

Thank you so much 

From my limited experience most decent companies ignore these qualifying earnings limits and just pay on the full amount, although clearly some employers will save every penny they can.
I think the lower limit in particular is up for review as it is particularly unfair on lower paid workers.
On a salary of £5000, the employer should pay £300 ( if the contract is clear that the 6% should be on all earnings) and the employee £240 from their after tax pay, and Nest would claim £60 basic rate tax relief for them and add it on.
Of course there would be nothing to stop the employee increasing their contribution higher than 6%, to have more going into the pension each month .

My employer uses the qualifying earnings limits unfortunately.

It is a small family run business with around 40 employees.   They will only pay the legal minimum in as well, 3% of the qualifying earnings.

If the lower limit is up for renew, then I hope this is adjusted, but am not holding my breath.

As you suggested, to compensate, I have gradually increase my contributions, currently at 35% and will be increasing to 40% in the new year, possibly 45% if I get a pay rise

xylophone

Then Nest is net pay, so they claim 20% from HMRC

Relief at Source?

https://www.nestpensions.org.uk/schemeweb/memberhelpcentre/contributions/claim-tax-relief.html

penners324

Accountant has got that wrong and is using qualifying earnings.

Also Nest is capable of doing salary sacrifice 

Albermarle

rjmachin said:

Albermarle said:

Bumblingbee said:

You have saved me a lot of time thank you! The intention and contractual agreement is that it would be 6% on all earnings, so we can go back and try and get that rectified.

Thank you so much 

From my limited experience most decent companies ignore these qualifying earnings limits and just pay on the full amount, although clearly some employers will save every penny they can.
I think the lower limit in particular is up for review as it is particularly unfair on lower paid workers.
On a salary of £5000, the employer should pay £300 ( if the contract is clear that the 6% should be on all earnings) and the employee £240 from their after tax pay, and Nest would claim £60 basic rate tax relief for them and add it on.
Of course there would be nothing to stop the employee increasing their contribution higher than 6%, to have more going into the pension each month .

My employer uses the qualifying earnings limits unfortunately.

It is a small family run business with around 40 employees.   They will only pay the legal minimum in as well, 3% of the qualifying earnings.

If the lower limit is up for renew, then I hope this is adjusted, but am not holding my breath.

As you suggested, to compensate, I have gradually increase my contributions, currently at 35% and will be increasing to 40% in the new year, possibly 45% if I get a pay rise

In the past before auto enrolment, probably this company, ( and similar ones) would have had no pension arrangements at all. So things have improved at least.

Regarding the lower limit, it has been brought up in discussions with Govt and the pensions industry as part of a wider review, but it seems to have been kicked into the long grass for now at least.
However the limits for 26/27 remain unchanged, which with rising wages will mean increased contributions from employers ( but not by much ).