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Pensions & salary sacrifice

Correct method of reporting to pension provider

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Bit of an odd situation, I'm covering for a FC who's off sick (planned operation). This person is new(ish) to the company.

I have to do the wages and pension contributions and was shown by her to post manually to the pension providers website. This is because according to her, her predecessor had set up the payroll software incorrectly and she hadn't yet had time to resolve this hence why it didn't go directly from the payroll software.

The reason that she thinks its wrong is because previously the contributions (ees & ers) have been posted to the employers contribution section when it goes to the pension provider. The staff are on salary sacrifice. She has changed this and separated them to employees and employers contributions.

My questions, which one is correct? I thought it was the former but she has me doubting myself. Secondly, what are the consequences of the error (the first method has been used for about 2 years, the second method for about 1 year so not insubstantial amounts).

Third, how would you handle it? I'm only going to be here for a couple of months so I'm not sure if I should try and correct it, leave it for her or go above her.

Replies (11)

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By jcace
15th Jan 2020 09:49

If there is a correctly setup salary sacrifice in place, I would expect the employee to forego an amount of salary and the employer then pay all of the contributions. The implication for reporting otherwise is that the pension provider could well be reclaiming tax on the supposed employee contribution, when in fact there are no employee contributions on which to reclaim income tax.
Much depends on whether there is a proper SS in place and the terms thereof

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By Not Anonymous
15th Jan 2020 09:49

Isn't the whole point of salary sacrifice that the employee doesn't make the pension contribution i.e. they are all employer contributions.

In return for which the employee has a lower salary and isn't subject to tax or NIC on the wages sacrificed.

If they are reported as employee contributions and it is a relief at source scheme then the pension company could be adding basic rate tax relief which is not due.

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By tom123
15th Jan 2020 10:25

If there is a salary sacrifice in place, the whole contribution is employERS.

Thus, no further tax relief is claimed at basic rate by the pension firm.

When doing the upload (or whatever) there is often a flag on the lines to indicate the payment is SS.

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By Wanderer
15th Jan 2020 10:43

Sandnickel wrote:

.... previously the contributions (ees & ers) have been posted to the employers contribution section when it goes to the pension provider.

Based on information given, subject to seeing underlying documentation this, in fact, sounds correct.
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By Sandnickel
15th Jan 2020 11:11

Thanks for the replies. They are definitely on salary sacrifice (I've seen the letters explaining it to the staff and their signatures accepting it).

Thanks also for the assurance that my thoughts were correct. The lady I spoke to is quite aggressive and I doubted myself whilst talking to her.

Anybody know what the consequences of this would be? The employees have clearly received double tax relief on their contributions for about a year.

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Replying to Sandnickel:
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By Not Anonymous
15th Jan 2020 13:04

Sandnickel wrote:

Thanks also for the assurance that my thoughts were correct. The lady I spoke to is quite aggressive and I doubted myself whilst talking to her.

Anybody know what the consequences of this would be? The employees have clearly received double tax relief on their contributions for about a year.

I suspect the first consequence will be an interesting (heated?) discussion between you and your colleague.

Is she likely to volunteer to sort it out with the pension provider?

Do you trust her to sort it out with the pension provider?

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By psimonparsons
23rd Jan 2020 12:52

You definitely need to seek advice. The double tax relief position may need to be addressed if true. If it’s a Net pay scheme not such an issue, but if a RAS scheme the pension provider may have claimed added tax relief not due to the pension. It may be worth contacting both TPR and HMRC for guidance on the process of correction.

It is worth contacting the pension scheme to seek guidance on the means of correcting the pension record from employee to employer. Good luck.

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By Matrix
23rd Jan 2020 12:56

Payroll - Are the contributions dealt with correctly on the payslip?

Pension - check if it is set up to reclaim BR tax, if so they have an issue.

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By MCraggs
23rd Jan 2020 13:24

Our pension provider has recently changed the way it wants us to report deductions made via Salary Sacrifice.
Originally, the total contribution was classed as employer. The pension provider has recently updated its software & now requires us to report the employer & employee contributions separately, however there is a flag to indicate that the contributions relates to salary sacrifice.

I say check with your pension provider.

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Replying to MCraggs:
By Kate Upcraft
24th Jan 2020 12:03

why would a pension provider ask you to declare what isn't true contractually? as everyone has said there are no employee contributions, it's a non contributory pension scheme. Very odd

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By john hextall
23rd Jan 2020 17:17

It's a nightmare, isn't it? I've just spent all day reworking pension calculations that have been done wrong all year and there are only 7 people in the scheme. I'd recommend talking to the pension provider and asking them what they want. It's unlikely their system would be accepting this data unless they had asked for it like that. Keep your fingers crossed...

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