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What effect do pensions paid have on SLR?

- Why is it difficult to find the Student Loan Repayment rules for pensions paid

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I have had expeirence of two different PAYE payroll software programs recently, one which increased the annual threshold for student loan repayment by the gross amount of pension premiums paid and one that didn't.  I am confused.

I know that the annaul threshold should be increased for the gross pension contributions paid but, as with others on this site, getting the facts about this is not easy.  The software company that is not increasing the annaul threshold by pension premiums paid sent me a link which they said they were working by.

Does anyone know if the software guidance is at fault or my understanding?

If some payroll software is calculating the student loan repayment incorrectly that is likely to affect a lot of empoyees and they will be repaying too much.

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By David Heaton
18th Oct 2019 19:12

Why would you alter the threshold? Income for collection of student loans through payroll is the amount that's subject to secondary NICs - it's that simple (except where there's an AEO, DEO or arrestment in place, when SL deductions might be capped as earnings are protected and court orders might take priority). If you pay pension contributions by salary sacrifice, your 'employee contributions' are converted to employer contributions and reduce your contractual gross pay for NIC, so they also reduce your SL income value. But it doesn't affect the threshold.

Taking NICable pay automatically excludes deductions for employee pension contributions and any amount paid into pension by the employer. The only issue should be choosing the correct plan (1, 2 or PGL) and the threshold value for the pay period. The threshold values are fixed (but will be different in Scotland from April 2021).

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