Pension scam?

[Hal 2001]

I joined a company a couple of years ago before the government made it mandatory for companies to have pensions however what was not made clear to me was the 2.5 % contribution that the employer was making was coming out of my salary!,through a cleverly worded phrase in my contract. When challenged my employer said I could have the money as salary but would effectively be leaving the company pension scheme however I would lose out on the benefits of being in the scheme. Should I stay or should I go ?

 

[ClubMan]

Can you post this clever wording maybe?

Note that it is not mandatory for employers to have pensions although it is mandatory for them to facilitate access via payroll to a PRSA where they don't have other pension arrangements for all employees in place. There is no requirement that employers contribute to a pension on behalf of employees.

 

[Hal 2001]

I can't remember exactly however it was something along the lines of :
' your re-numeration package will consist of: salary of ..xyz ,a 2.5% contribution will be made towards your pension scheme, VHI contribution etc' reading it as a new employee ,giving the benift of the doubt to the employer, I interpeted as they were contributing + salary.It even isnt distuinguish as such on my payslip ie the 2.5% sum is indicated as employer contribution. In the origional negotions on pay the final sum agreed didn't come with any civets as in 'we will pay you x but will discount y'.

 

[ClubMan]

I can't remember exactly however it was something along the lines of :

It's difficult to comment on the "scam" allegation without the precise wording available.

It even isnt distuinguish as such on my payslip ie the 2.5% sum is indicated as employer contribution.

If a personal/AVC contribution is described as an employer contribution then that would certainly seem very odd and misleading.

As to the original question of what you should do it depends on other factors such as charges on the scheme, other benefits available under the pension (and other benefits?) scheme etc.

 

[ajapale]

Have you got your annual pensions statement?
Have you got the rules of your occupational pension shceme?

The most likely explanation here is that your employer is matching your contribution up to 2.5%. Your pre tax dedcution will appear on your payslip. In order to see what the employer has contributed you will need to check the statement.

 

[Hal 2001]

No problem with the pension statement, all the contributions are going in. However the pension contribution from the employer is definitely coming from my salary.

I've confirmed with my employer and they've stated I can have the 2.5% as salary and make my own pension arrangements if I want to however would I be any better off?

Is my employer getting tax breaks on this which I could avail of?

I'll get back to you on that wording ClubMan.

 

[ClubMan]

I've confirmed with my employer and they've stated I can have the 2.5% as salary and make my own pension arrangements if I want to however would I be any better off?

What charges apply on the occupational scheme?

Is my employer getting tax breaks on this which I could avail of?

They may be avoiding 10.75% employer PRSI on the 2.5% of your salary that is put into the pension and will have to pay that if they pay that money to you as salary.

 

[ajapale]

No problem with the pension statement, all the contributions are going in.

When you say all the contributions are going in what do you mean?

Do you mean your 2.5% EE contribution + their 2.5% ER contribution?
The EE contribution appears on your payslip as a pension deduction and the ER contribution does not. Both contributions should appear on your annual pensions statement.

The alternative is for them to give you a plus payment of 2.5% on top of your salary and you make your own arrangements and pay up to your revenue limits into a PRSA or a Private pension.

aj

 

[Conan]

Without wishing to add to the confusion in this case, an employer cannot operate an occupational pension scheme based solely on employee contributions. Where an occupational pension scheme exists (not a PRSA), the employer is obliged to contribute a minimum of 10% of the total contribution.
So if the employee is contributing 2.5% of salary, then the employer must contribute at least o.3% (approx) i.e. 10% of 2.8%.

The only way that the emlpoyee can be contributing on his own (no employer contribution) is though a PRSA facility (where all the employer is doing is facilitating the deduction of contributions from salary, remitting them to the chosen PRSA provider and thus ensuring that the employee is getting tax relief under the "net pay" system).

Hal 2001, I suggest you clarify with the pension provider exactly how the pension plan is structured, who is contributing what, how its invested and what is the charging structure. From reading the mails so far, I am still unclear as to exactly what you have.

 

[ajapale]

interesting question concerning minimum ER contribution to occupational pension scheme split to here.