AIBU to think that 3% employer pension contribution is low?

[Alwaysonarecce]

Morning, hopeful some HR savvy people out there not consumed in pre Christmas prep!

I have been given a job offer and am going through the employment contract. All looks fine however the employer contribution to the pension is 3% - AIBU to think this is low and would I be seen as ‘cheeky’ to flag this before accepting their offer? For background, I left my last employer when my son was 2 and have been a SAHP for a year, now ready to get back into the job market again and mindful of my pension being on hold. My last employer matched my contributions and the pension before that was a final salary scheme - appreciate this is getting rarer. What do you think? Should I just accept this is how it is now and raise my own percentage? Thank you.

3% is the minimum by law isn't it ? TBF my employer only does 4%, it's better than nothing!

Mine does 5%

I really doubt you will persuade them to raise the contribution as they’d be open to having to do the same for everyone. However you can always ask.

And do put as much as you possibly can in.

3% is the minimum they can contribute. If they offer you a higher contribution they'd have to role that out to everyone.

I doubt they'd be open to negotiation on that point.

You can always try to negotiate a higher salary and put that excess into a pension - it depends on the sort of job and employer whether negotiating will work. Some are bound by fixed salaries for certain roles that they are not allowed to increase.

You can always increase your own contribution. If the job is, say, 2% better paid than other similar jobs, it will even out.

Yes, 3% of pensionable income is the national minimum Workplace pension contribution for employers. Those that offer a higher % rate do so to all their employees as an incentive. There is no requirement for every employer to do that.

It is much too low to give a decent pension, but that's not the point. The new idea of forcing employers to contribute a small amount (as opposed to nothing many would have contributed in the past) is that if people who didn't have pensions are forced to have them, they will stop and think about how much they need to put in, and some will decide to put in more than the minimum. (It doesn't make sense to force higher contributions, as that won't be suitable for everyone, and it reduce employment by increasing labour costs.)

If your prospective employer is paying the legal minimum, the job is comparable to one that wouldn't had had a pension in the past, not to one that had a higher contribution.

My previous employer was 3%, current is a sliding scale up to 10% so I contribute 6% and they do 10%

3% is legal minimum and it’ll be hard to negotiate. You’d be better to negotiate a salary increase and then add that to your own contribution

it's the current legal minimum under autoenrolment.
Depends on the size ot the organisation, but they are unlikely to make an exception to the policy.
If they won't increase the pension, think about using the low pension as a bargaining tool to get a better salary offer.
e.g. Sorry, when I applied fot the role, I assumed that the pension would be more generous; the package is less than I'd anticipated - are you able to offer a higher salary?

If their contribution is 3% and you expected 10%, you can potentially negotiate an additional 7% on the salary.
THen decide if you want to invest the extra in their schem or a personal one.

Quite a lot of organisations I've worked for have offered highr pensions if individuals made a higher contribution - although I'd generally expect that to be detailed in the contract - or does the contract refer you to an additional handbook?

@PettyContractor

I think the small legal minimum is there to spare the state from needing to pay pension credit or other top ups to those that would otherwise only have the state pension.

But I do sincerely hope that it makes people think too.

Employer pension contributions are a tax-efficient form of remuneration. But salary is much more likely to be tailored to an individual than the level of employer pension contributions. So if you are not happy with the overall package, it would make more sense to ask for higher pay than a bigger employer pension contribution.

I think the small legal minimum is there to spare the state from needing to pay pension credit or other top ups to those that would otherwise only have the state pension.

I agree that for some low-earners, pension (and other) savings don't make sense, because it will just reduce their benefits. I don't think this was the primary motivation for introducing compulsory pensions though. (Maybe I'm too generous in believing what the government at the time said their motivation was.)

Don’t waste another second thinking you’ll be able to negotiate your pension. You won’t.

So if you think it’s not in line with your expectations - negotiate an increase in salary.

In fact I do recall that it was openly debated that it was wrong to force people on low incomes to save into pensions, for just that reason. That's why people are allowed to opt out.

Maybe I'm too generous in believing what the government at the time said their motivation was.

What reason did they give? I always imagined that it was to build up funds they could pillage appropriate to pay social care bills. ISTR that that was the time-bomb they'd just identified?

It is low and unlikely to get you a good retirement income (various campaign groups think the total minimum - employer and employee - contributions should be raised to 12% from the current 8%).

As with PP, I would point this out and use it to negotiate a higher salary, explaining that you'll need this to increase your pension contributions.

Yes, it is the minimum allowed. My employer contributes just over 21% but I do accept that it's an excellent scheme

Well, we don’t know how much the OP earns or contributes themselves so there’s no way of telling if it’ll be enough in retirement.

Thank you. Seems IABU to flag the pension for many sensible reasons outlined above - thank you for clarifying it all so clearly. I will try and negotiate a salary rise to compensate. I have to do this by 27th Dec but expect to hear back early Jan. I’ll update this thread!

@NiceLegsShameAboutTheFace that’s whopping!

I thought 5% was the minimum by law now- But yes, it is insultingly low. When I worked PT I got 3% and some months is was like £12. What is the point with that?

I thought 5% was the minimum by law now
It is 5% total - employer min is 3% leaving 2% min from the employee

I thought it was now 8% - employee must now (from April 2019) pay 5%, employer 3%

I thought it was 5%, increased from April this year?