UK Engineers Pension Scheme
UK Engineers Pension Scheme
(OP)
Question for all the UK engineers here. My company is introducing a new payment scheme whereby the way tax is paid changes as follows:
1 - Stop making pension contributions as a deduction from salary
2 - Company pays pension contribution directly
3 - Company reduces gross basic salary by an amount equal to the contributions
4 - Pay less national insurance as a result meaning take home pay will go up.
We will be automatically entered into the scheme, but we can opt out if we want to.
Apparently all pay awards, overtime, etc will apparently be based on the original gross salary, not the reduced one. whether I trust them or not is another matter
Question to anyone who's seen this type of scheme introduced where they work - should I opt out or allow myself to be included?
Ben
1 - Stop making pension contributions as a deduction from salary
2 - Company pays pension contribution directly
3 - Company reduces gross basic salary by an amount equal to the contributions
4 - Pay less national insurance as a result meaning take home pay will go up.
We will be automatically entered into the scheme, but we can opt out if we want to.
Apparently all pay awards, overtime, etc will apparently be based on the original gross salary, not the reduced one. whether I trust them or not is another matter
Question to anyone who's seen this type of scheme introduced where they work - should I opt out or allow myself to be included?
Ben





RE: UK Engineers Pension Scheme
The Pensions Act coming into effect soon places duties on employers to make minimum contributions via stakeholder pensions. Employees are also supposed to make minimum contributions but they receive tax relief against them - roughly for every £80 you contribute you receive the benefit of £100
Surely if you subscribe to this scheme you will get caught by the "benfit in kind" type rule where you will end up paying personal tax on the benefit gained (similar to the company car situation?)
Also - how will you know how much pension your Company is actually contributing on your behalf? Normally if you got cost of living increase your contributions would also go up but how is your company going to guarentee that the contributions they make on your behalf will keep pace?
I'm no lawyer or accountant so if i were you i'd ring HMRC and ask if this is legal!
Regards, HM
No more things should be presumed to exist than are absolutely necessary - William of Occam
RE: UK Engineers Pension Scheme
*NOTL SAL X
*PENSION Y
&BASICPAY Z
* = NON-PAYABLE
(Note that X=Y+Z)
Pension isn't taxable whether it's part of your pay or not, but your basic pay is subject to National Insurance to both you and your employer, so in theory it's in both your and your employer's interest to do this.
Because of this, my employer offered us a sweetener to opt in. For the first year they gave us back half of their savings.
My feeling is that it's a loop-hole that'll be plugged at some point by the government. Use it while you can. Everything is in writing. Keep copies.
I haven't tried getting a mortgage based on my notional salary yet though, or read the small print of last year's P60. I'll be checking this year's quite closely.
- Steve
RE: UK Engineers Pension Scheme
Personally I'd forget about pensions and engineering and go and head up a bank and retire on 650k after a couple of years work. Apparently you don't even need any banking qualifications!
corus
RE: UK Engineers Pension Scheme
I guess the crux of the issue is the level of trust you have in you company to adhere to what they say and a bank to believe you when you state your notional salary on an application.
Ben
RE: UK Engineers Pension Scheme
- Steve
RE: UK Engineers Pension Scheme
This is the way my pension scheme works. It does give you more take home pay but there is a catch. Your state pension is based on your salary after the 'reduction' so salary sacrifice means your state contributions are less and consquently your state pension will be less.
You need to make the call if that will be an issue for you. Its more of a problem if you are in the lower tax bracket I think.
http
RE: UK Engineers Pension Scheme
One thing to note is that, as I have been recently told, the tax refund for the amount you pay from your salary into the pension by the normal method is not usually refunded until the end of the year. One benefit for your companies scheme I suppose.
RE: UK Engineers Pension Scheme
Once you buy into something like that (and it really wasn't a bad deal), count on paying part of the savings to a tax accountant in retirement. In my case it isn't a huge cost, but some of the folks who retired at the same time as I did weren't very careful about the accounts and have gotten themselves in trouble and the interest/penalties have more than eaten up any notional savings.
David
RE: UK Engineers Pension Scheme
Tax is simple and largely handled by your employer. Regular overpayment followed by annual rebates is rare. Tax accountants are rarely required. Once the money is in your bank, you can forget about tax.
Once you get into high-rate tax it can get more complicated. You may be asked to fill out an occasional tax return some years.
- Steve
RE: UK Engineers Pension Scheme
somptinguy - more and more people i know are being asked to do self-assessment... since i've been contracting it is a royal pain in the behind
cheers all, HM
No more things should be presumed to exist than are absolutely necessary - William of Occam
RE: UK Engineers Pension Scheme
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If we learn from our mistakes I'm getting a great education!
RE: UK Engineers Pension Scheme
RE: UK Engineers Pension Scheme
I can opt-in next year so I won't lose too much if I decide it is the right option later.
Ben
RE: UK Engineers Pension Scheme
RE: UK Engineers Pension Scheme
does anyone want to hire an Mech Eng from the US?
RE: UK Engineers Pension Scheme
Unless your contract but then your self employed effectively.