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Pension Contributions

Client who does not have to provide a stakeholder pension (less than five employees) wants to provide contributions for their three employees. They don't however want to have to contract or have a relationship with a pension fund provider. They have suggested paying an additional 5% of salary to the employees on the basis that the employees then make the contribution themselves, however surely there is no obligation in this instance for the employee to pay the additional 5% of salary received into a pension fund. What would be a sensible suggestion in this instance where the employer does not want to get "involved" in pensions yet they want to offer a competitive package which includes an element of pension contribution? Many thanks for any advice.

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Hargreaves Lansdown
Have a chat to Hargreaves Lansdown. See www.hl.co.uk

I have no connection with them other than as a safisfied client.

Captain

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By zebaa
31st Jul 2012 19:38

What industry?

Some industries have pension arrangements in conjunction with employers & union. The object is to provide good pensions at as low a cost as possible, because fees can eat away at a pension pot to a surprising degree.

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31st Jul 2012 21:41

H/L is very good in my experience.  

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01st Aug 2012 08:31

Should be straightforward

It is a while since I looked at pensions administration but the "stakeholder" concept was merely an attempt to make personal pensions easily accessible and understandable to everyone - individuals, employees and employers - in an attempt to demystify the process and lower the charges (especially broker commissions).

Provided all the employer's records are in order - there should be no problem in an employee providing their pension provider's details to the employer, for them to contact the provider informing them that their employer may pay lump sum contributions directly on their behalf, the employer contacting the provider to advise of this as well and then paying contributions as and when they choose. 

The perceived difficulty will be that the provider will want (and will be "geared up" to) to enter into a regular employer's contributions arrangement (which you say they do not wish to) but the employer is perfectly entitled to make payments at their own discretion.  The only stumbling block may be that the provider may refuse to allow this - for their own reasons. 

My own experience of H/L is that their customer support and administrative activities are very good (which they need to be in order to operate in their industry).  Be very aware however that they are fundamentally BROKERS who are successful by SELLING services and products.

I hope this is useful.

tladirect

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Rather than...

... the employer contribute 5%, provided the employees contribute 5% (which as you note is difficult to police), why doesn't the employer get the employees to take a 5% salary sacrifice in exchange for a 10% employer contribution. Everybody then gets an NI saving on what would otherwise be the employees' contributions. Such an arrangement is tax neutral to the proposed position.

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01st Aug 2012 13:34

I asked my ifa

He advised that some companies accept contributions from both employers and employees seperately. Other wise a number will accept an annual cheque from the employer

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By charlb
01st Aug 2012 13:58

Thanks all for your responses, they're very helpful. Is there any difference then if the employer makes the contribution as an employer contribution rather than paying it to the employee who then makes the contribution as an employee contribution - all will it ultimately depend on the scheme details? Just wondering really whether there are any adverse implications of it being an employer contribution. Many thanks again.

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By zebaa
01st Aug 2012 15:54

Is there any difference...

It seems unlikely there will be any negative difference in outcome if the employer contributes. Take Steve Kesby's suggestion on board, in outline it seems the best way to go.

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