Private Pension Contribution and Living Wage?

6022tivo

Hi.

I have 5 x PAYE part time jobs.

My latest one is offering a pension with salary sacrifice.

Min 4%, Max 100% company contribution 7%.

I want to do 100% of this job into the said pension. I earn enough off the other 4 jobs, I'll earn about 2-3k annually from this one.

The conditions say the following.

Salary exchange isn’t for everyone – it’s unavailable if it reduces your earnings below the Real Living Wage and you will be notified if this is the case.

My salary for this job is the national living wage? So does this mean I can't sacrifice/exchange 100%??

If so, why offer 100%

If read right, it will mean I can't sign up at all?? As it will drop even a 4% below the national living wage?

Secret2ndAccount

Every pay packet must be above or equal to National Minimum Wage for the hours worked in that job for that week or month. There's no combining. So it's unlikely you can use salary sacrifice much or at all.

Linton

https://forums.moneysavingexpert.com/discussion/6684997/private-pension-contribution-and-living-wage

Salary sacrifice is where you agree with your employer that your contracted wage should be reduced in exchange for a higher employer pension contribution. This is different to a standard ermployers pension where your employer pays a fixed amount and your contribution is deducted from your wages as a line item on your payslip.

It is almost 100% certain that your scheme is the latter where the only limit is your total income. There would, as you say, be no point in salary sacrifice for someone on minimum wage.

Marcon

My salary for this job is the national living wage? So does this mean I can't sacrifice/exchange 100%?? 

If so, why offer 100%

You can contribute 100% of your pay as a personal contribution. In practice you'd pay in 80% of your pay and the provider would add tax relief at basic rate to bring it up to 100%, assuming this is a 'relief at source' scheme.

6022tivo

https://forums.moneysavingexpert.com/discussion/comment/82153436#Comment_82153436

I think you're right as they call it salary exchange, no sacrifice?

LukeB_92

You have read it right, I'm afraid: under salary exchange your pay for that job cannot drop below the legal minimum for the hours worked in that pay period, and your employer is applying an even stricter floor (the Real Living Wage). So if this job is already at the living wage, even the 4% minimum via exchange is unavailable to you for this job — it is assessed per employment, not across your total income from all five jobs.

The 100% figure is about a different route: personal contributions. You can personally contribute up to 100% of your relevant UK earnings, with basic-rate tax relief added automatically (so roughly 80p from you becomes £1 in the pot). That 100% is the ceiling schemes quote because that is the ceiling for tax relief — it is not an offer of 100% salary exchange. If you do want to funnel a lot of this job's pay into the pension, the personal-contribution route works, but at your pay level it is worth weighing up locking away a whole income stream before doing it.

Albermarle

Perhaps ask your employer if they will still make the same contribution, but to a personal pension you will set up.

kermchem

The merit of salary sacrifice is that a pension contribution is made before NI or Income Tax are deducted, so the employee gets relief from both. Yes, the employer also gets to pay less NI that they might give to the employee. There is no point using salary sacrifice unless there is an NI saving.

The OP reports that they have 5 PAYE part time jobs. Does any of these jobs individually pay £242 per week or more? Is the OP above the NI threshold? Is the OP paying any NI?

Edit to add - if the OP is not paying any NI from any of these part time jobs because none of them reaches the lower threshold for employee NI, then they might be better making voluntary NI contributions that adding to a employer pension.

Linton

Surely the employer, by law, must offer a basic wage employee the option of joining their pension scheme. Only having it available by salary sacrifice would break the law.

I suggest the OP asks their employer. Perhaps there is a standard pension scheme available.

Marcon

https://forums.moneysavingexpert.com/discussion/comment/82153684#Comment_82153684

Correct. There are any number of minimum wage employees who would be excluded from pension schemes if their only route to joining would be by salary sacrifice.

https://forums.moneysavingexpert.com/discussion/comment/82153632#Comment_82153632

Why would the employer agree to that? OP says they will be earning £2K-£3K a year from this job, so doesn't qualify them for automatic enrolment. Even if they ask to join, the employer doesn't have to contribute because they are earning below the earnings threshold (£6,240 for the current tax year), so I think such a request is going to fall on deaf ears.

DRS1

I may be missing something but surely this workplace pension can't be exclusively salary sacrifice? They say you can contribute up to 100% of salary. But nobody could salary sacrifice 100% of their salary. So presumably it must cater for contributions by some other method? And the OP could use that method (and presumably qualify for the employer contributions by doing so).