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Original poster

Employer deducts pension before tax and NI...is this wrong?

14 replies

specialkallday · 22/03/2023 09:30

My take home is about £45 a month higher because they do it this way and I'm worried at some point I'll be asked to pay it back..

They deduct my pension payment from the gross pay, then calculate tax and NI from that figure.

I understand it should be the other way round?

OP posts:
user18 · 22/03/2023 09:30

its correct

Original poster
specialkallday · 22/03/2023 09:38

When I use the online calculators, they calculate tax and NI on my gross salary, not the lower salary when pension is deducted.

How can both be correct?

OP posts:
Moltenpink · 22/03/2023 09:40

You can have a salary sacrifice pension (which is what you have). Some people choose not to, as it makes your gross pay lower which would be an issue when applying for a mortgage (for example)

minou123 · 22/03/2023 09:40

Yes it's correct.

Your confusion maybe coming from the fact there are 2 ways you can get tax relief on yiur pension contributions:

  1. Net Pay - deduct your PC from your pay before any tax is deducted.
  2. Relief at Souce - deduct your PC your pay after ant tax is deducted.

Its a little more comolicated that that 😁There are benefits to both, but for most people Net Pay way is more beneficial.

So don't worry, it's all correct.

Hoppinggreen · 22/03/2023 09:40

My employer takes the pension out pre tax
Thats one of the reasons why they are good from a tax efficiency point of view

TiredandLate · 22/03/2023 09:40

Both are correct. Look up net pay and relief at source.

Lindy2 · 22/03/2023 09:41

Your employer is probably doing a salary sacrifice method for the pension contributions. It's a way of saving both tax and NI on payments into the pension scheme.

Your pension department or HR is really the best place to go for information.

WimbyAce · 22/03/2023 10:02

NI is normally deducted from gross pay. Tax is deducted after pension contributions taken so you get the tax relief on that.

WimbyAce · 22/03/2023 10:03

If pension is being taken as a sal sac you should see it in the gross deductions column.

YukoandHiro · 22/03/2023 10:04

It's correct because your tax savings are tax free

YukoandHiro · 22/03/2023 10:04

Your pension savings I mean!

stevalnamechanger · 22/03/2023 10:05

Moltenpink · 22/03/2023 09:40

You can have a salary sacrifice pension (which is what you have). Some people choose not to, as it makes your gross pay lower which would be an issue when applying for a mortgage (for example)

It's not an issue if you go through a broker

This is the best kind of pension to have

gogohmm · 22/03/2023 10:06

@stevalnamechanger

Employer pensions are better than brokers because the employer contributes!!!

stevalnamechanger · 23/03/2023 16:47

You are misreading, my comment is regarding a mortgage broker not a pension

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