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Pension or Cash

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Hello Forum

A firm I am involved with offers 9% pension payments for all employees.  A few have now asked if this can be paid to them as extra wages rather than as pension contributions.  

The owner of the firm does not oppose paying it as extra wages instead in prinicple.

I'd be grateful for any thoughts or experiences from anyone regards this issue.

Thanks in advance.

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Caroline
By accountantccole
14th Jun 2019 11:32

I'd be careful - you may find that the extra salary becomes contractual?

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By kiwilondon99
14th Jun 2019 14:51

and NICable and may be [ depending on contract ie zero or limuited hours] also holiday payable

could consider a small bonus at some point to ensure not part of regular remuneration ?

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By WhichTyler
14th Jun 2019 11:34

1. They are effectively opting out of auto-enrolment so watch the procedures for that
2. Employers NI will be on top of any payment
3. watch out for creeping differentials as time goes on (ie basic pay rates are consistent whichever pension scheme they go for...)

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By Accountant A
14th Jun 2019 12:12

Employers and employees can enter into any arrangement that complies with the employer's "auto enrolment" responsibilities. Not sure what else can be said.

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By PBH64
14th Jun 2019 12:36

Do the maths. £100 pension contribution costs employer £100. £100 gross remuneration costs £113.80. £87.87 gross remuneration costs £100. £87.87 gross added as marginal income is £59.75 net to someone on average earnings.

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By PBH64
14th Jun 2019 12:36

Do the maths. £100 pension contribution costs employer £100. £100 gross remuneration costs £113.80. £87.87 gross remuneration costs £100. £87.87 gross added as marginal income is £59.75 net to someone on average earnings.

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By Chris Tallis
14th Jun 2019 12:55

Thanks for the answers and some good points raised. I should have said that if paid as wages then the percentage would be lower to take account of NI but do appreciate the knock on effect.

I think its more whether its a good idea in prinicple to offer the option and flexibility or whether best to just say pension is the only option.

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By Accountant A
14th Jun 2019 13:54

Chris Tallis wrote:

I think its more whether its a good idea in prinicple to offer the option and flexibility or whether best to just say pension is the only option.

If you treat employees as grown ups, they should be able to make their own decisions. In practice, the whole idea behind auto enrolment was to encourage pensions saving by "forcing" it onto employees.

If the concern is one where employees are likely to stay for the medium to long term, I'd be more inclined to not give a salary in lieu option.

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By paul.benny
14th Jun 2019 13:54

I’d be very wary of offering cash in place of auto-enrolment pension. Inducements to opt-out are generally prohibited. Whether cash alternative qualifies as an inducement may be a question of the specifics. I would certainly seek specialist advice before proceeding.

See detailed guidance from The Pensions Regulator on safeguarding individuals: https://www.tpr.gov.uk/-/media/thepensionsregulator/files/import/pdf/det...

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By penelope pitstop
14th Jun 2019 15:54

Easy peasy.

If you are going to live to 150 then go for pension.

If you are going to drop dead on the date of retirement or before then go for extra pay.

But from experience, you will see that you reach retirement before you realise. At this point you may have wished you had made better pension provision.

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