Pensions and payroll

[V8mate]

Anyone work in payroll? I can't find any consistent messages on usually useful websites via Google.
Even online salary calculators are throwing out different figures for what seems like a straightforward set of circumstances.

1. It used to be the case that any part of an employee's salary which was directed to a pension scheme, saved the employer making their Employer's NI contribution on that amount. I've seen some sources, however, suggesting that is no longer the case. Can anyone confirm?
And does it make a difference whether the pension scheme is administered by the employer, or is the employee's private pension or SIPP?

2. If my salary was £65,000, and I have the employer direct £15,000 to a pension, the remainder of my salary will only attract lower rate tax, whilst my pension tax relief would be at 40%? (Based on this year's figures)
So the gross investment would be £25k pa? But I'd have to do a self-assessment tax return to realise the entire 'rebate'?

[Tim330]

I think you only save on the NI if it's a salary sacrifice arrangement. I don't know the name of my current employer DC scheme but I only save on the tax.

[Mr Pointy]

Try the Finance forum for this question as well.

[TwigtheWonderkid]

If you are on £65K and they pay £15K by salary sacrifice, in effect you are only on £50K and there's no tax to claim back on the £15K, because no tax was ever paid on it.

If you are on £65K and you are paying £15K in then that's paid in after tax has been paid already. So the pension co would automatically claim back another 20% and you'd get the further 20% back by adjustment to your tax code.

Certainly, that's the way it works with my company.

[V8mate]

TwigtheWonderkid said:

If you are on £65K and they pay £15K by salary sacrifice, in effect you are only on £50K and there's no tax to claim back on the £15K, because no tax was ever paid on it.

If you are on £65K and you are paying £15K in then that's paid in after tax has been paid already. So the pension co would automatically claim back another 20% and you'd get the further 20% back by adjustment to your tax code.

Certainly, that's the way it works with my company.

That's clear, thanks.
So I would pay into the pension from my net income and then get the two, additional 20% tranches via the relevant processes.

That approach certainly wouldn't allow the employer to save on Employer's NI though?

[Tim330]

V8mate said:

TwigtheWonderkid said:

If you are on £65K and they pay £15K by salary sacrifice, in effect you are only on £50K and there's no tax to claim back on the £15K, because no tax was ever paid on it.

If you are on £65K and you are paying £15K in then that's paid in after tax has been paid already. So the pension co would automatically claim back another 20% and you'd get the further 20% back by adjustment to your tax code.

Certainly, that's the way it works with my company.

That's clear, thanks.
So I would pay into the pension from my net income and then get the two, additional 20% tranches via the relevant processes.

That approach certainly wouldn't allow the employer to save on Employer's NI though?

If you make a personal contribution then you certainly won't save the employer or employee NIC.

[Macroni18]

Pension contributions do not lead to NI savings for employer.
Salary sacrfice - yes.

[edc]

You do not need to do a self assessment to claim higher rate tax relief. You can write to HMRC to explain your circumstance and tell them the relevant salary, contributions and dates.