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Pension incorrectly reported

Pension recorded as salary sacrifice when it isnt

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If anyone can help with a bit of guidance....a pension has been reported by the employer to the pension scheme as being salary sacrifice, hence all contributions show as employer only.  I understand that would be the correct format if the pension was a salary sacrifice scheme, but it isnt, it is just a regular auto enrolment pension.  The pension scheme has contacted the payroll dept to enquire about this.  It has been reported in this way since 2015 and then all of a sudden there has been a change and it was reported as not salary sacrifice since April (maybe furlough has prompted this?) (but there is still no split showing for employee contributions) Are there any consequences for the employees fund of this being incorrectly stated, for example, does it have a bearing on the tax relief for either the employer or the employee?  Would there be any reasoning behind it being incorrectly stated or does it sound like a simple payroll error?

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By paul.benny
12th Oct 2020 12:35

With conventional ee/er contributions, employees who leave within a short period are refunded their contributions (or can leave in the fund). If it's a salary sacrifice, the employer keeps the lot.

For severance and SMP, treating ee contributions as salary sacrifice, reduces ee entitlements.

Salary sacrifice can result wages being below statutory minimum.

Salary sacrifice is a contractual variation (to pay). Treating ee pension contributions as salary sacrifice means that employees are not actually receiving contractual amounts. In theory, they might be able go to a tribunal to claim for unauthorised deductions. This is a bit of a nuclear option as the employees are not actually worse off.

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By KAT49
12th Oct 2020 13:21

Hi Paul.benny. Thank you for the above. The employee has been there almost 5 years. I probably haven't explained well, but the pension appears (from correspondence between employer and employee) to be a standard auto enrolment pension and NOT salary sacrifice - no mention whatsoever of a salary sacrifice arrangement or option. But the employer has reported to the pension scheme that it IS a salary sacrifice scheme so it appears to be incorrect. I just wondered if that was a simple error to adjust or if that has any sort of consequences for the employees fund.

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JCACE
By jcace
12th Oct 2020 13:46

If the scheme gives employees relief at source then the contribution reporting will need to be corrected, as the pension scheme won't have reclaimed the employees' tax relief.

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