Workplace Pension Contribution and NMW

Hi, I would like to make an increased contribution to my workplace pension during March payroll. This will be completed via an AVC process. The contribution I would like to make is approximately 80% of my monthly salary. I have been told by my employer that doing so, would result in my net pay for the month being below the national minimum wage and have rejected my AVC for the amount requested and proposed a reduced value to process. Is this correct? I understood that you could make up to 100% of your salary into the pension, (up to £60k per year to receive tax benefits) Thanks

Hi  tony_tony

This is correct.  Your employer has to follow the rules around the national minimum wage.  
By paying in 80% of your income into the pension scheme, you would not earn enought to meet the guidlines of the national minimum wage.  
Have a look at National Minimum Wage and National Living Wage rates.

Thank you

 

Hi - can I seek further clarification of the rules regarding pension contributions and the NMW? I am semi-retired, receiving income from a private pension and a part-time job of around £25k per annum. I have an additional part-time job with hours to suit both employer/employee mostly in the Spring & Summer months. This job has an hourly rate of £12.19 plus a pension scheme which I have opted into. It is a small job earning around £1000 - £1200 per annum. Last year I asked for all of my salary to be paid into my pension which was granted. This year I have been told this is not possible because this would take me below the NMW & a copy of this thread was provided. Is this correct? If so, how can anyone on the NMW ever contribute into a pension scheme provided by their employer?

Hi,
HMRC cannot comment on specific arrangements without undertaking a full National Minimum Wage investigation and is unable to provide advice on the terms of an employment contract, it can only provide general advice and signpost to available guidance.  
Deductions for pension contributions do not reduce a worker's minimum wage pay provided the amounts:

• are not expenditure in connection with the worker’s employment; or
• are not for the employer’s own use or benefit.   

However, pension contributions taken through a salary sacrifice scheme will reduce NMW pay.
Even if a worker has voluntarily entered into a savings scheme and may benefit from being in the scheme their pay will still be reduced for minimum wage purposes if the amounts deducted are held by the employer, to do with as they wish, meaning the deduction is for their own use and benefit. For more information, please refer to the guidance below:
Any determination would depend on the arrangements in place.
Saving schemes
Thank you.