Additional Contributions from Employer
Discussion
My employer pays 3% into my pension. This is their contribution not mine. I pay 5% which comes from my pay before tax as expected. This isn't 3 and 5% of gross because there is a cap. So as I'm over the cap its only 3 and 5% of the cap amount. That's all pretty straightforward I believe. They recently changed pension companies so the first few months pension went into one company and now its going into a different one. I'm a bit annoyed by this because I now have 2 separate tiny little pension pots when 1 would be simpler. They told me I can pay to move from the old to the new which I declined. So I decided to organise my own SIPP. I then asked if I could stop paying the 5% which is apparently optional because I'd rather deal with it in my SIPP. They said yes but if I do that they stop their 3% too. Can they do that?
Yes they can do that.
Many company pensions (regardless of whether it is an auto-enrolled scheme or not) have a stipulation that employee contributions are needed to trigger the employer contribution.
OP - can you contribute your 5% as salary sacrifice and then ask to have the saved employer NICs added to your pension? Costs them nothing and adds more to your pension.
Many company pensions (regardless of whether it is an auto-enrolled scheme or not) have a stipulation that employee contributions are needed to trigger the employer contribution.
OP - can you contribute your 5% as salary sacrifice and then ask to have the saved employer NICs added to your pension? Costs them nothing and adds more to your pension.
Yes they can, and they will.
Membership of your employer's pension plan is not mandatory, it's voluntary, so it's your decision whether to join or not. If you decide not to join, you are not contributing to anything so neither will your employer.
If you decide to set up something separate, eg a SIPP, then it's up to you to decide who with, what to contribute etc. And don't expect your employer to pay into your own separate arrangement: why should they when they have already gone through the costs of setting up something for their employees, and in addition to their own contributions they pay for the any other costs eg management, communications etc.
R.
Membership of your employer's pension plan is not mandatory, it's voluntary, so it's your decision whether to join or not. If you decide not to join, you are not contributing to anything so neither will your employer.
If you decide to set up something separate, eg a SIPP, then it's up to you to decide who with, what to contribute etc. And don't expect your employer to pay into your own separate arrangement: why should they when they have already gone through the costs of setting up something for their employees, and in addition to their own contributions they pay for the any other costs eg management, communications etc.
R.
oyster said:
Yes they can do that.
Many company pensions (regardless of whether it is an auto-enrolled scheme or not) have a stipulation that employee contributions are needed to trigger the employer contribution.
OP - can you contribute your 5% as salary sacrifice and then ask to have the saved employer NICs added to your pension? Costs them nothing and adds more to your pension.
I assume they already do this as salary sacrifice. How would I know?Many company pensions (regardless of whether it is an auto-enrolled scheme or not) have a stipulation that employee contributions are needed to trigger the employer contribution.
OP - can you contribute your 5% as salary sacrifice and then ask to have the saved employer NICs added to your pension? Costs them nothing and adds more to your pension.
The Leaper said:
Yes they can, and they will.
Membership of your employer's pension plan is not mandatory, it's voluntary, so it's your decision whether to join or not. If you decide not to join, you are not contributing to anything so neither will your employer.
If you decide to set up something separate, eg a SIPP, then it's up to you to decide who with, what to contribute etc. And don't expect your employer to pay into your own separate arrangement: why should they when they have already gone through the costs of setting up something for their employees, and in addition to their own contributions they pay for the any other costs eg management, communications etc.
R.
Not expecting to be treated different or special. Just curious why me declining to add my 5% called voluntary means they stop adding their 3% too.Membership of your employer's pension plan is not mandatory, it's voluntary, so it's your decision whether to join or not. If you decide not to join, you are not contributing to anything so neither will your employer.
If you decide to set up something separate, eg a SIPP, then it's up to you to decide who with, what to contribute etc. And don't expect your employer to pay into your own separate arrangement: why should they when they have already gone through the costs of setting up something for their employees, and in addition to their own contributions they pay for the any other costs eg management, communications etc.
R.
Would it make any difference to me as an employer to do this? Would it cost me any extra?
We used to run a GPP before auto enrolment and TBA if an employee was astute enough to set up a SIPP and divert contributions to that I don’t think I would have been overly bothered.
Maybe I’m misreading OP?
We used to run a GPP before auto enrolment and TBA if an employee was astute enough to set up a SIPP and divert contributions to that I don’t think I would have been overly bothered.
Maybe I’m misreading OP?
Seems pretty simple to me. They put in 3% and take a standard or 'voluntary' 5% from my pay packet. I can increase the 5% amount which I did for a few months and worked as expected - now held with the old pension provider. I asked if I can remove the 5% and they said yes but then we then remove our 3%. So it is not just a 'voluntary' 5% as if I remove it then the I am removed from the scheme / pension / thing altogether. Their 3% is conditional on my 5%. I didn't bother asking about reducing my 5% down to 0.001% because that felt petty. Surely it is all setup now. They just send a file of numbers to the provider and it does what it does. I cant see why their 3% has to be conditional on my 5% unless they are using some tax benefits to them gained from me contributing this 'voluntary' 5% and they use this to fund their 3% but that all seems quite petty too.
Your understanding of how it works is incorrect.
Under workplace pension legislation the minimum contribution is 8% of relevant earnings, of which the employer must pay a minimum of 3% and the employee the balance. The total contribution to the workplace pension scheme can be more than 8% but not less.
So if you don't want to pay your share the employer cannot just pay their share in isolation.
Under workplace pension legislation the minimum contribution is 8% of relevant earnings, of which the employer must pay a minimum of 3% and the employee the balance. The total contribution to the workplace pension scheme can be more than 8% but not less.
So if you don't want to pay your share the employer cannot just pay their share in isolation.
It is because these are the rules for auto enrolment pensions.
The law now forces all employers to automatically enrol every qualifying employee into a pension and make a 3% contribution, with you making a 5% one. The employer has not ability whatsoever to opt you out of this and therefore this is an additional business expense for them.
You, on the other hand, are entitled to opt yourself out of this pension, but when doing so you are also opting your employer out of its responsibility to make its 3% contribution on your behalf (at you are no longer a member of the scheme).
So yes, their 3% is conditional on your 5%.
I hope that makes sense.
The law now forces all employers to automatically enrol every qualifying employee into a pension and make a 3% contribution, with you making a 5% one. The employer has not ability whatsoever to opt you out of this and therefore this is an additional business expense for them.
You, on the other hand, are entitled to opt yourself out of this pension, but when doing so you are also opting your employer out of its responsibility to make its 3% contribution on your behalf (at you are no longer a member of the scheme).
So yes, their 3% is conditional on your 5%.
I hope that makes sense.
Stay in Bed Instead said:
Your understanding of how it works is incorrect.
Under workplace pension legislation the minimum contribution is 8% of relevant earnings, of which the employer must pay a minimum of 3% and the employee the balance. The total contribution to the workplace pension scheme can be more than 8% but not less.
So if you don't want to pay your share the employer cannot just pay their share in isolation.
Cross over there, I had started my post before you posted but got distracted before coming back to it!Under workplace pension legislation the minimum contribution is 8% of relevant earnings, of which the employer must pay a minimum of 3% and the employee the balance. The total contribution to the workplace pension scheme can be more than 8% but not less.
So if you don't want to pay your share the employer cannot just pay their share in isolation.
Absolutely!
Stay in Bed Instead said:
Your understanding of how it works is incorrect.
Under workplace pension legislation the minimum contribution is 8% of relevant earnings, of which the employer must pay a minimum of 3% and the employee the balance. The total contribution to the workplace pension scheme can be more than 8% but not less.
So if you don't want to pay your share the employer cannot just pay their share in isolation.
Ok thanks.Under workplace pension legislation the minimum contribution is 8% of relevant earnings, of which the employer must pay a minimum of 3% and the employee the balance. The total contribution to the workplace pension scheme can be more than 8% but not less.
So if you don't want to pay your share the employer cannot just pay their share in isolation.
Is the cap on contribution also standard?
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