Question about AVCs and nmw

[bananamuffin99]

Hi! I am currently paying the max I can contribute to my work place pension which is 5% and my employer pays 11%. I recently increased my AVCs to 15%, when I was doing this there was a notification to say it's my responsibility to ensure I don't go below nmw. The way I am paid is I get my basic salary which is just over £23,600, I also get additional allowances depending on my roster which is probably around another £14,500 yearly, probably more. If you just include my basic salary my pension contributions take me below nmw, but if you include my allowances it doesn't. Does anyone know how they work it out? Is it solely based on basic salary? I will contact payroll and see what they say, but they are notoriously slow at getting back to people so I thought I would ask here too :)

Is it even legal to put that responsibility on you?
It's not illegal for you to work from less than minimum wage, but it is illegal for them to pay you less than minimum wage.
They need to look out where that line is crossed. Ask them to do that.
If they don't, they will be in trouble with HMRC.

Ok I think it depends on how the avc is being processed. Regular Pension itself is allowed to take you below nmw as otherwise anyone on nmw wouldn’t be able to contribute. A salary sacrifice pension however is not allowed to drop you below minimum wage as it isn’t really a pension, it’s you agreeing to reduce your salary in exchange for pension paid by your employer. So I think the avc if it is Sal sac can not drop you below nmw. This will be on pay within the pay period. So will include any allowances etc for that month.

It’s the payrolls job to check that and not yours.

If it’s not salary sacrifice then you can increase the pension contributions to whatever you want as it isn’t counted in nmw calculations

Hmmmm, I’m thinking we possibly do the same job….. I was under the impression it’s only basic salary that counts. I’m not 100% sure though. Do you have any pension groups you can join on Facebook or similar?

Are you a bit of a jet setter by any chance?! 😉

The AVCs are done via salary sacrifice yes. ChatGpt says it's only based on basic salary. I guess I will look into a SIPP. I just liked the convenience of it all coming out of my salary.

It may have changed since 2006 but I tried to use salary sacrice to buy childcare and wasn't able to as it would mean I would earn less than NMW - so I couldn't do this and get the tax break - even though it would have been my choice.At the time I was working for a local authority

I just liked the convenience of it all coming out of my salary.

thats surely the better option as you get a tax break - if you take it out of your net pay then you'll miss out on the tax break?

are you paid your bonus in a lump sum?

Yes, you can generally pay a lump sum into your

This is what AI says about using your lump sum bonus - maybe use part of your bonus each year if its paid in a lump sum

Additional Voluntary Contributions (AVCs) directly from your salary bonus. This is a tax-efficient way to boost your pension, as the contribution is usually taken before tax, allowing you to avoid income tax on that amount.

Key Details on AVC Lump Sums from Bonuses:

• How to Pay: Contact your employer’s payroll or HR department to arrange for a specific, one-off deduction from your bonus.
• Tax Benefits: Because contributions are deducted from your pay before income tax is calculated, you receive tax relief automatically.
• Limits: While you can invest a significant portion of a bonus, the total amount of pension contributions receiving tax relief is generally limited to 100% of your taxable earnings.
• Considerations: It is highly recommended to check your employer's specific AVC guide and be aware of the "Annual Allowance" for pension contributions to avoid tax charges.

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sorry its not a bonus but an allowance, my mistake

Maybe…..

I think you probably need a definitive answer from the pension scheme rather than on here as our set up is somewhat unique. Worth asking on any work Facebook groups you might be in, there are some pretty clued up people out there!
I’m about to have to start making the same calculations