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Relief at source Question?

  • 3 posts
  • # 116556

Hi,

I was wondering if anyone could help me get my head around this question...

 

I've been asked to set up a NEST "Relief at source" Pension

(contributions are deducted after tax - Correct?)

At the same time i have been asked to set up for employees so that they contribute a percentage of their gross pay.


I can't get my head around why it looks to be why they are asking me to make contributions deducted after tax, then contribute a percentage of their gross pay and how this might be done???

 

 



Edited at 04 Apr 2018 10:03 AM GMT

  • Fellow PM.Dip
  • Practice Licence
  • 111 posts
  • # 116563

Hi Ashley

 

Relief at source is where the employee pays their contribution net of tax and the tax is added to their pension pot by HMRC. Pension contributions are calculated on gross pay so using last years rates, where an employee contribution is 1% they actually have 0.8% deducted from their net pay.

The pension % is based either on the total pensionable pay (which is at a minimum their gross salary but can include bonuses, overtime etc) OR it is based on qualifying earnings which is their pay over the qualifying earnings threshold.

If this is your first time setting up a pension I would seriously recommend that you read the literature on the Nest website and call their helpline to make sure you set it up correctly as setting it up incorrectly could be a costly mistake for your employer.

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