Workplace pension

Starbrite · 21 August 2019 at 6:49PM

I actually seem to be collecting this as I am temping at the moment, every opportunity I have had I have opted in

this aside.

The agency I am currently temping with are using NOW Pensions, this week is the first week I have had pension deductions. 3.5% £13.75 of my weekly pay was deducted, when I was expecting 5% to be deducted £19.65

I obviously questioned this with the agency who came back to me informing me..

The pensions amounts are calculated on qualifying earnings, which means for the 2019/20, the first £118 of weekly pay is excluded from the calculation.

https://www.nowpensions.com/help-centre/faqs/key-information/what-is-the-auto-enrolment-earnings-threshold

Therefore, £393 less £118 = £275.00

£275 x 5% = £13.75

I will admit I am confused by this, this is the first I have heard of a lesser % being paid in, I assumed from day 1 I'd pay 5% and the company 3% on the total amount earnt each week.

Does this mean each week I will be paying in 5% on the Gross Pay after £118 has been deducted each week?

Why is the £118 deducted? why am I not paying 5% on the gross total?

I am able to up my %, which I might do to fill the shortfall

(Just for information this is not my main pension I do have a personal one too)

xylophone · 21 August 2019 at 8:27PM

https://www.gov.uk/workplace-pensions/what-you-your-employer-and-the-government-pay

https://www.moneyadviceservice.org.uk/en/articles/automatic-enrolment-if-you-earn-up-to-10000

Brynsam · 21 August 2019 at 10:58PM

I know you aren't in NEST, but their website gives a particularly clear explanation: https://www.nestpensions.org.uk/schemeweb/helpcentre/contributions/calculating-contributions/calculate-contributions-using-qualifying-earnings.html

JoeCrystal · 22 August 2019 at 7:06AM

Yes, unfortunately, your employer can do this. My employer switches over to qualifying earnings when they realise it would be cheaper for their employees, or so they said.

Some employers really do not get the merits of providing a proper retirement provision at work.

Silvertabby · 22 August 2019 at 12:09PM

JoeCrystal wrote: »

Yes, unfortunately, your employer can do this. My employer switches over to qualifying earnings when they realise it would be cheaper for their employees, or so they said. Some employers really do not get the merits of providing a proper retirement provision at work.

Isn't it the case that the employer's contributions are less as well?

On another board, in which some posters were complaining about the UK State pension being so much lower than EU pensions, a poster with a Dutch sounding name responded with something like this:

"Dutch pensions are a hybrid scheme, part State and part private. In addition to the Dutch version of NI, employee and employer each pay 10% into a private scheme. This is what pays for the much better pension. Opting out is not allowed"

Call me cynical, but I don't believe that Dutch employers don't take this 10% into account when setting pay rates. So, essentially, it's the employee who pays the full whack - 10% pension contributions plus 10% less salary from the start.

The Dutch chap went on to say that he/she didn't understand why the UK didn't introduce a similar scheme. Answer: Because there would be rioting in the streets by people who wouldn't want to pay this level of pension contributions, preferring instead to rely on pension credit and housing benefit (because they're entitled). No doubt these would be the same people who then go on to complain about EU pensions being so much more than ours....

Automatic enrolment is getting there, but we still have a bit to go yet (and I will never understand why it is possible to opt out of UK AE !)

nigelbb · 22 August 2019 at 12:18PM

Silvertabby wrote: »

Isn't it the case that the employer's contributions are less as well?

On another board, in which some posters were complaining about the UK State pension being so much lower than EU pensions, a poster with a Dutch sounding name responded with something like this:

"Dutch pensions are a hybrid scheme, part State and part private. In addition to the Dutch version of NI, employee and employer each pay 10% into a private scheme. This is what pays for the much better pension. Opting out is not allowed"

Call me cynical, but I don't believe that Dutch employers don't take this 10% into account when setting pay rates. So, essentially, it's the employee who pays the full whack - 10% pension contributions plus 10% less salary from the start.

The Dutch chap went on to say that he/she didn't understand why the UK didn't introduce a similar scheme.

Automatic enrolment is getting there, but we still have a bit to go yet (and I will never understand why it is possible to opt out of UK AE !)

France has a similar compulsory hybrid scheme with a basic state pension plus separate large earnings related pensions(s). The target is for you to retire on a pension at least 50% of your former income. Just fifteen years working in France gave me pensions amounting to nearly triple the UK state pension & I was able to take it at 63 years & 5 months.

Silvertabby · 22 August 2019 at 12:22PM

nigelbb wrote: »

France has a similar compulsory hybrid scheme with a basic state pension plus separate large earnings related pensions(s). The target is for you to retire on a pension at least 50% of your former income. Just fifteen years working in France gave me pensions amounting to nearly triple the UK state pension & I was able to take it at 63 years & 5 months.

I believe Germany and Spain have similar schemes.

Starbrite · 22 August 2019 at 6:52PM

I know Finland have a similar system, they pay ridiculous amounts of tax, when you look at it on the surface, then when you see where it goes it makes sense.

I wouldn't mind a system on par with that, here in the UK pension is an after thought and what with the way things are going I very much doubt I will get a state pension...

It is cheeky there is this loop hole for companies to do this, shouldn't matter if I am temping or permanent, I will still need money in my old age

jsinc · 22 August 2019 at 8:23PM

Silvertabby wrote: »

...Automatic enrolment is getting there, but we still have a bit to go yet (and I will never understand why it is possible to opt out of UK AE !)

Because it's a mostly privatised salary reduction scheme that pays out to current retirees. That may be a good thing in principle, but why should everyone be forced to partake in a private pension scheme incorporating obligatory and cumulative middle-man fees? Government could effectively promise the same thing at cost via the tax system (rather than retiree income streams relying on asset purchases by current workers), with same net effect of money from the working population to retirees.

Whether Government will ever do that is another matter, but e.g. while alternatives exist the increases in private auto-enrollment contributions is for the benefit of the finance industry and growing numbers of retirees not workers.

Edit - Not saying OP shouldn't pay into workplace pension. You should - as much as you can afford and can get employer to contribute, because the system is what it is.

hyubh · 22 August 2019 at 9:27PM

jsinc wrote: »

Because it's a mostly privatised salary reduction scheme that pays out to current retirees. That may be a good thing in principle, but why should everyone be forced to partake in a private pension scheme incorporating obligatory and cumulative middle-man fees? Government could effectively promise the same thing at cost via the tax system (rather than retiree income streams relying on asset purchases by current workers), with same net effect of money from the working population to retirees.

Not saying I'd like to recreate GMPs, but wasn't that effectively the pre-AE/nSP position...? Default was a sort of CARE additional state pension, with the ability either for a company on behalf of its employees or an individual on behalf of her or himself to contract out and take their contributions elsewhere, within certain boundaries that ensured the end pension wasn't a million miles away from the additional state pension forgone. So, if someone wanted middlemen, they could have them, otherwise things were done efficiently under state and state-mandated systems already in place.

jsinc · 22 August 2019 at 10:49PM

hyubh wrote: »

Not saying I'd like to recreate GMPs, but wasn't that effectively the pre-AE/nSP position...? Default was a sort of CARE additional state pension, with the ability either for a company on behalf of its employees or an individual on behalf of her or himself to contract out and take their contributions elsewhere, within certain boundaries that ensured the end pension wasn't a million miles away from the additional state pension forgone. So, if someone wanted middlemen, they could have them, otherwise things were done efficiently under state and state-mandated systems already in place.

I guess so, so maybe the question is why the change in that direction? My preference would be for the private pension system and tax relief to be unwound and social priority and benefits focused on better public pension provision. Everyone should also be free to save however they like for retirement privately.

I also think less money directed towards financial and property assets over the real and now economy would be a good thing. The problem is AE tries to mask that the economics and issues of the worker-retiree transfer mechanism is just the same for private pensions as for the State Pension. At some point with an ageing population pension benefit payments will likely increase at a faster rate than contributions, with a knock-on effect on asset prices and calls for Government to plug gaps. Rather than experience growing contributions and retirement aspirations for forecasts that may not materialise, I'd rather we openly addressed it now via taxation now than double down on pretence or hope.

Thus I don't agree with AE but think there's zero likelihood Government reverses things soon. And I say all that as a current beneficiary of existing setup, with work history in markets/investments benefiting from the status quo.

Workplace pension

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