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Employer Pension Contribution Tax

deltrotter
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Employer Pension Contribution Tax

#295677

Postby deltrotter » March 30th, 2020, 12:46 pm

Hi all

Just started with a new employer, having moved out of public sector.

The employer is making a contribution to a pension with Standard Life. They said they would contribute 10% of salary but it looks like they are only putting in 8%.

Could it be correct that Standard Life (via a tax reclaim) will add on the other 2% to make it up to the 10%?

I know it works this way if I add money to my SIPP, e.g. add in £80 and then the SIPP provider adds £20 a month or so later, but didn't know if this was the same with an employer contribution.

TIA

Del

ursaminortaur
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Re: Employer Pension Contribution Tax

#295823

Postby ursaminortaur » March 30th, 2020, 7:08 pm

deltrotter wrote:Hi all

Just started with a new employer, having moved out of public sector.

The employer is making a contribution to a pension with Standard Life. They said they would contribute 10% of salary but it looks like they are only putting in 8%.

Could it be correct that Standard Life (via a tax reclaim) will add on the other 2% to make it up to the 10%?

I know it works this way if I add money to my SIPP, e.g. add in £80 and then the SIPP provider adds £20 a month or so later, but didn't know if this was the same with an employer contribution.

TIA

Del


My understanding is that employer contributions attract tax relief for the employer by reducing their tax bill NOT for the employee.

https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/employer-contributions-and-tax-relief/

For tax relief to be given on employer contributions, they need to be deducted as an expense in calculating the profits of a trade, profession or investment business. They should be included in the profit and loss account of the employer and will subsequently result in the amount of an employer's profit being reduced. In the case of a trade or profession the employer contributions will be deductible as an expense provided that they are incurred wholly and exclusively for the purposes of the employer's trade or profession.


https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/tax-relief-employer/

Tax relief on employer contributions is given by allowing pension contributions to be deducted as a legitimate business expense.
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Tax relief on employer contributions from companies is given against corporation tax. Partnerships and the self-employed who make pension contributions for their employees obtain tax relief through the contributions being deductible from their total profits.
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The tax treatment of employer pension contributions is significantly different to the tax treatment of member contributions.


Hence the employer contribution to an employee's pension is as far as the employee is concerned always effectively a gross contribution.

deltrotter
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Re: Employer Pension Contribution Tax

#295831

Postby deltrotter » March 30th, 2020, 7:55 pm

Thanks Ursaminortaur!

That is my understanding as well...

Cheers

Del

OLTB
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Re: Employer Pension Contribution Tax

#295994

Postby OLTB » March 31st, 2020, 10:20 am

deltrotter wrote:
They said they would contribute 10% of salary but it looks like they are only putting in 8%.



Hi Del

I am aware that the minimum pension contribution under the Workplace Pension rules is now 8% (3% as a minimum from the employer) so might it be something to do with this? Perhaps if they are using a salary sacrifice method of funding, you are getting an enhancement from your employer's National Insurance savings.

Cheers, OLTB.

deltrotter
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Re: Employer Pension Contribution Tax

#295999

Postby deltrotter » March 31st, 2020, 10:28 am

Hi OLTB

Interesting - I do wonder if it is something like this...

I will check it out! Thank you.

Cheers

Del


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