Ask the Expert: I've just joined a workplace pension scheme - so why am I not saving tax?
Our reader this week wants to know why enrolling on a workplace pension scheme hasn't cut their tax contribution on their pay slip.
I’ve just joined my company pension scheme having worked there for three years.
I didn’t join the scheme before – I said no when I was asked a couple of years ago – but thought I should do so now as I recently got married.
When my company explained it to me, I thought they said I would pay less tax if I joined but my payslip isn’t showing any less tax this month. Is this right?
Response from Carl Lamb of Almary Green
I think what your employer was trying to explain to you was the concept of tax relief.
When you join a workplace pension scheme, what happens is that the government puts the tax that you paid on the amount of your contribution directly into your pension – so if you are a basic rate taxpayer you will get an additional £2 into your scheme for every £8 you contribute from your pay after tax.
In addition, under the rules, your employer must also contribute to your scheme.
In the current tax year which ends on April 5 2019, your employer will put in at least 2% of your qualifying earnings and you must put in 3% gross – ie including the tax relief – but it goes up on April 6 2019 to 3% paid by the employer and 5% gross paid by you.
Workplace pensions are a great way to begin to save for the future because of the tax relief and employer contributions.
Workers who opted out when their employer’s scheme started have the option to opt back in again if they so wish and will automatically be re-enrolled once the scheme has been in place for three years.