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Salary lowered due to pension? (not nec. sacrifice)
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Tigsteroonie
Posts: 24,954 Forumite
I have to admit to not having read the details on workplace pensions (they don't apply to me!) but it will apply to Marley-BIL and the small firm for which he works eventually.
I understand that minimum % contributions will be 8% (split between employer, employee & government-SMART-tax-wriggle thingie).
Marley-BIL has said that there is a notice on their board at work to say that they will have to take an 8% paycut when the pension is introduced in a few years time.
Question is, is this right? Effectively the company expect the employees to take a paycut that equates to the entire pension contribution - including the employer's contribution. So the employee is taking the full whack.
Sounds dodgy to me but I don't understand the detail of the scheme other than the SMART deduction thingie (as my pension has that).
I understand that minimum % contributions will be 8% (split between employer, employee & government-SMART-tax-wriggle thingie).
Marley-BIL has said that there is a notice on their board at work to say that they will have to take an 8% paycut when the pension is introduced in a few years time.
Question is, is this right? Effectively the company expect the employees to take a paycut that equates to the entire pension contribution - including the employer's contribution. So the employee is taking the full whack.
Sounds dodgy to me but I don't understand the detail of the scheme other than the SMART deduction thingie (as my pension has that).
:heartpuls Mrs Marleyboy :heartpuls
MSE: many of the benefits of a helpful family, without disadvantages like having to compete for the tv remote
Proud Parents to an Aut-some son
MSE: many of the benefits of a helpful family, without disadvantages like having to compete for the tv remote
Proud Parents to an Aut-some son 0
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Question is, is this right? Effectively the company expect the employees to take a paycut that equates to the entire pension contribution - including the employer's contribution. So the employee is taking the full whack.
The reduction should not include the employer contribution. Just the employee contribution.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Take that notice, make a copy of it, or simply photo it. - make sure nobody sees you doing it - cameraphones are very useful when whistleblowing.
Then send that to the pensions regulator.
That is not right at all. The employer in this case is essentially forcing their staff to pay for the whole thing by proxy.
They are being very stupid - breaking both the spirit and the letter of the rules. Additionally, they are being stupid in that they could simply get all their staff to sign up to the scheme via salary sacrifice and actually pay less out as they wouldn't have to pay employers NIC's on contributions.
This is not right at all!
0845 600 7060 available here: http://www.thepensionsregulator.gov.uk/contact-us.aspx0 -
Interesting reading on this thread i thought i will post about what may happen to me,
The company have said due to the new business pressure they will find themselves in of the auto enrolment The company is proposing to stop the current Company pension scheme which is 5% employee and company 10% and start a new company pention scheme with maximum contributions of 5% employee and 5% employer. Also proposals that may result in changes to the following.
Annual holiday, Overtime rates, Hours of work, Notice Periods, Sick pay and redundancy.
(In my mind they are trying to offset the cost)
I calculted on todays rates if the pension did change and i stayed with the employer untill i retired my pension pot would not see just over 40k.
Watch this space....0 -
Yes, I did wonder about all these employers' actions to offset the cost. I will be interested to see how my employer will react to increase in cost. At least they cannot cut minimum wage!
Cheers
Joe0 -
Daniel_Elkington wrote: »Take that notice, make a copy of it, or simply photo it. - make sure nobody sees you doing it - cameraphones are very useful when whistleblowing.
Then send that to the pensions regulator.
That is not right at all. The employer in this case is essentially forcing their staff to pay for the whole thing by proxy.
I did wonder ... I'll ask BIL whether he feels confident enough to take a sneaky photo! If not, it might have to wait until they get individual letters about it.:heartpuls Mrs Marleyboy :heartpuls
MSE: many of the benefits of a helpful family, without disadvantages like having to compete for the tv remote Proud Parents to an Aut-some son 0 -
Is it actually illegal? As far as I know it's illegal for an employer to give their employees inducement to opt out - so if they could avoid the pay cut by opting out of the pension scheme that would definitely be illegal. But in a general sense it's not illegal for an employer to propose different pay, either higher or lower. The fact that auto-enrolment is upon us shouldn't change that.Daniel_Elkington wrote: »That is not right at all. The employer in this case is essentially forcing their staff to pay for the whole thing by proxy.
They are being very stupid - breaking both the spirit and the letter of the rules.
I wouldn't even say it's breaking the spirit either. With the rules requiring an employer to pay 3% of an employee's total remuneration into a pension, it's clear that the salary will thus represent 97% of what they're actually willing to pay. In the long run then, auto-enrolment is bound to result in salaries being 3% lower than what they otherwise would have been (though of course total remuneration is the same, that's kind of the point).
That said, I do think the company is being silly. 8% doesn't reflect the cost to them, which at peak will be 3%. Also, the expected way to adjust salaries is just to withhold pay rises that you otherwise would have given. A straight-up pay cut attracts much more aggro for very little gain.
I suspect the company just wanted to cut pay, and is using auto-enrolment as a fairly flimsy excuse.0 -
If the employer's staging date is some time away e.g. 2015 then they could probably cut back on future pay increases to create room for the employer's contribution - but anyone on NMW will have to be paid at the full NMW rate, I believe.
Cutting current rates of pay is more tricky and may require consultation (potentially a change of terms & conditions of employment if the current rate of pay has been communicated and is already in payment ...?)
I agree with dtsazza in that in the long term, in companies that do not currently have a pension scheme, then total pay will be set at a level which is salary plus pension contributions. This is what happens in most companies who do have a pension scheme as most apply the concept of "total reward".Warning ..... I'm a peri-menopausal axe-wielding maniac
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In any case, every employer only needs to contribute 1% of salary until October 2017. The full 3% contribution only applies from October 2019.Debt_Free_Chick wrote: »If the employer's staging date is some time away e.g. 2015 then they could probably cut back on future pay increases to create room for the employer's contribution - but anyone on NMW will have to be paid at the full NMW rate, I believe.
That's seven years until they need to make those contributions - during which time they would almost certainly be able to miss out on a payrise or two to make salary 3% lower than it would have been. (Even if the BoE keeps inflation at 2% (ha!), that's still 14.9% compound inflation over seven years - i.e. staff would require 14.9% payrises in total just to maintain the same real wage. So it would be very easy to find 3% in "withheld payrises" over the period.)
The behaviour isn't at all conducive with their claimed reason - so either the company bosses lack comprehension and finesse (uh-oh), or they're just trying to pull the wool over their employees' eyes about what's going on.0 -
Interesting reading on this thread i thought i will post about what may happen to me,
The company have said due to the new business pressure they will find themselves in of the auto enrolment The company is proposing to stop the current Company pension scheme which is 5% employee and company 10% and start a new company pention scheme with maximum contributions of 5% employee and 5% employer. Also proposals that may result in changes to the following.
Watch this space....
This makes no sense. If your company already has a pension scheme then auto-enrolment will not apply. Sounds like they are just using it as a convenient excuse to worsen the pension scheme.0 -
malcolmffc wrote: »If your company already has a pension scheme then auto-enrolment will not apply.
I'm sorry, but this is incorrect. Auto-enrolment will still apply - and the scheme will have to be of a minimum standard too.Warning ..... I'm a peri-menopausal axe-wielding maniac0
This discussion has been closed.
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