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Employee Pension Contributions

Can an employer pay into an employee's personal pension scheme?

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I have a client that gives it's employees the opportunity to pay into the NEST pension scheme and the company pays the usual top up.  They have recently recruited a senior member of staff who would like the company to pay into their personal pension scheme. Can they do this and is such a payment a bonafide deduction against taxable profits?

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By David Ex
24th May 2022 15:02

64463Sa wrote:

I have a client that gives it's employees the opportunity to pay into the NEST pension scheme and the company pays the usual top up.  They have recently recruited a senior member of staff who would like the company to pay into their personal pension scheme. Can they do this and is such a payment a bonafide deduction against taxable profits?

What’s your initial research suggesting?

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paddle steamer
By DJKL
24th May 2022 15:21

They can make the payment and likely get relief for same (they will need to tell the scheme it is an employer contribution) but they may not have satisfied their obligations under the Auto Enrol rules re this particular employee.

I found it much simpler with my own employer to just pay the funds into our AE scheme (Peoples). When I retire I will either transfer it to my SIPP or loot the People's one first.

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By tltodman
24th May 2022 15:50

Pretty sure for AE obligations you'd need to enrol them into the company scheme and them opt out in the first instance. But then, yes, I believe the company can pay an employer contribution into the employee's personal scheme (it's important it's set up as an employer contribution) and it would be an allowable tax deduction as it's part of the employee's overall remuneration package

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Replying to tltodman:
paddle steamer
By DJKL
24th May 2022 16:07

Catch is you may not induce them to opt out of the workplace pension, get your timing wrong you could end up paying into both.

Also not sure I would like to give any employee leverage if in the future the relationship soured and we had between us fudged matters.

If I was the employer I would solely make contribution to the workplace scheme and what the employee does with the funds thereafter is their concern.

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By Hugo Fair
24th May 2022 21:01

"you'd need to enrol them into the company scheme and them opt out in the first instance" ... is I'm afraid incorrect.

Partly as DJKL says because you'd almost certainly fall foul of the 'inducements' hurdle; but mostly because it just isn't a requirement to auto-enrol an employee under AE in the 'company scheme'. Your obligations are met (subject to all the other conditions) when you auto-enrol the employee in any 'qualifying scheme'.

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By Hugo Fair
24th May 2022 20:57

Late to the party (dental visit that won't colour my responses) ...

Yes and Yes to the two specific questions; but, as DJKL has hinted at, this will only get you off the hook for your AE obligations if you first obtain (in writing) confirmation from the scheme manager that it is a 'qualifying scheme' for AE purposes.

However, even if it is, that doesn't mean that the employer must acquiesce to the request ... and, personally, I've never done so - if only on the basis that once you say yes to one employee then it would be inequitable not to offer the same service to all. And that would lead to an administrative quagmire (especially if said employees have more than one personal scheme and want to keep switching between them)!

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