PENSION SCHEME CONTRIBUTIONS

Apr 06, 2005 1 Replies
L

mu husband is about to join his new employers pension scheme, employee contributions are 3.4%, employers are 2.5%. The info says that this scheme attracts full tax relief on contributions, I take that to mean that the contributions are deducted BEFORE tax is calculated on his monthly salary - am I correct in thinking this please? and also am I right in thinking that the 11% NI is calculated on the full monthly salary amount before pension contributions are deducted? Hope that makes sense!



Cheers!



Lu


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P

employee

Hi Lulu

If the info say full tax relief then that means, as you say, that the contributions are deducted from his gross pay, the the rest is classed as taxable.

As for the NI, yes, it is calculated before the pension deduction, however, you should check whether the scheme is contracted in or out of the state pension sheme (S2P, formerly known as SERPS). If it is contracted out he will pay a lower percentage of NI because he will not be building up extra state pension.

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