Employee pension contributions

Company has been paying employee pension contributions without deducting from salary

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 I have recently taken on a client, who uses NEST for its pension scheme.

The previous accountant has been uploading pension contributions to NEST (which were then paid by direct debit) for both employee and employer as I would expect. However, it transpires that the employee contributions have not gone through the payroll, i.e. the company has shouldered the expense of both the employee and employer contributions. 

On option is of course resubmitting the whole payroll for nearly 2 years and claiming the shortfall back from the employees, but the employer understandably doesn't want to do that.  I therefore think the only option is to treat the employee contributions paid to date as a pecuniary liability and taxing it as such? 

Has anyone ever experienced this before? Any thoughts would be appreciated please!

Replies (4)

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Euan's picture
By Euan MacLennan
09th Oct 2018 18:41

What is the problem?

The law specifies a minimum total (employer + employee) contribution and a minimum employer contribution, but not a minimum employee contribution. The current figures are 5% and 2% respectively of qualifying earnings. If the employer has paid over (at least) 5% without asking the employees to contribute anything, that's fine.

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By Wanderer
09th Oct 2018 19:39

They may not have paid over enough! This could be the case if they have paid the employee 1%/ 3% contributions net.

Alternatively if they have paid over the whole 2% / 5% gross these these are all just regarded as being employer's contributions.

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By Sarahk87
09th Oct 2018 19:45

Thank you for the replies.

They have paid 5% in total so I am happy the minimum has been met. My concern was that 3% was reported to Nest as if it were an employee contribution - I am aware that pension contributions aren't a taxable benefit but I was slightly concerned as it had been reported as an employee contribution but actually paid by the employer it might create some kind of pecuniary liability - upon reflect I am perhaps over thinking this!

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By Matrix
09th Oct 2018 20:11

You will need to check that the scheme has not been set up to claim basic rate tax back on the employee contributions and that the 3% contributed on behalf of the employee is therefore gross, as mentioned above.

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