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Pension contributions under "net pay"

I'm trying to understand step 2 of

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"Mark's taxable employment income for the year would have been greater but for contributions of £9,000 that he made in the tax year to a registered pension scheme under the net pay arrangement."

Would (could) this 9000 correspond to a "matching contribution" made by his employer to his private pension?

(Step 6: although the limits have been changed to 130000 since this was written, Mark is now kicking himself for not giving an additional 376 gross to charity in 2009-2010)

I'm trying to make sure I've got all my ducks in a line before the chancellor changes the limits or rules again on March 24th. The previous change on Dec 9th contained "grandfather" provisions to protect regular pension contributions that were set up before Dec 9th and likewise pension arrangements set up before 22nd April 2009 were protected from the anti-forestalling legislation introduced.

Tim.

Reply to
Tim Woodall
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No it's probably his contribution to his employer's pension scheme, which is deducted from his taxable pay.

Reply to
Andy Pandy

OK. Thanks.

So would employers matching contributions appear anywhere in the calculation of "relevant earnings"?

If the answer is no, would they count towards the 20K limit for higher rate tax relief?

Going back to that hmrc page in step 4 assume that Mark's only made a

5000 net contribution to his personal pension scheme but his employer matched his contribution.

I can see two ways this might be handled:

  1. the 6250 employer's matching contribution gets added onto Mark's taxable employment in step 2 and then subtracted again in step 4 subject to the 20000 total relievable contributions limit.

  1. the 6250 employer's matching contribution is totally ignored effectively making it a non-taxable benefit.

I can see that if the employers matching contribution comes about as a result of a salary sacrifice then it will be caught in step 5 but I cannot see how it works if there is no salary sacrifice involved.

On my payslip, the pension match appears in the "Deductions" column but is not included in the total for that column. (Which sort of makes sense to me)

In 2011 the calculation of `gross income' will include employer matching contributions but I cannot find anything that explicitly says how they're handled for the calculation of `relevant income' either before April 2011 or after.

Tim.

Reply to
Tim Woodall

I thought they were still consulting on how to do this after 2011, which was why the anti-forestalling rules lowered the income limit to

130,000 (to catch those with taxable income below 150,000 but whose income pre-pension contributions may be over 150,000).

This may help

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Reply to
Andy Pandy

Thanks. Yes, I think they're still consulting on how to do this after

2011 but it's this tax year I'm trying to understand.

I spoke to HMRC today and they said that employers contributions do not count towards the 20000 limit for pension contributions.

They pointed me to this page:

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... deduct the amount of any of the following: relievable pension contributions paid by, or on behalf of, the member during the tax year (this does not include contributions paid by an employer);

And then I found this one:

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An employer pension contribution which is not linked in any way with a salary sacrifice is not included in the individual's total income amount.

I've no idea why I couldn't find those pages when I was googling. I even had site:hmrc.gov.uk.

Tim.

Reply to
Tim Woodall

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