Question on pension contribution

[NeoZ]

I never bothered to understand this, but Is your pensions contribution (your share + Employers share) considered your earning? .i.e. Employer's share is part of your Gross earning when claiming points?

[geriatrix]

Only if the employer's contribution to your pension fund is declared on the payslip(s).


regards

[ganeshptrk]

I think it is only the employee's contribution counted as part of your gross earnings and NOT employer's

[nks]

I think it is only the employee's contribution counted as part of your gross earnings and NOT employer's

Time to dig this again. I am trying to get answer to this with my other recent posts but no clear trend. Appreciate opinions from seniors.

[AccountantMatthew]

Employer contributions don't form part of your gross salary on payslips.

Employee contributions do form part of your gross salary. The reason they are deducted to arrive at taxable pay (so gross pay and taxable pay differs) is because they are not taxed when you contribute; pensions are, however, subject to taxation when drawn.

Employer contributions will be over and above what is on your payslip, otherwise they would really be additional employee contributions.

If you are in any doubt then just check the terms of your contract of employment and ask your employer. They will be the best documents/people for your specific question.

[hsmp_to_tier1]

Re employee's contribtuions: it depends whether you make your pension contributions from NET salary or from your GROSS salary.

If you make it from your GROSS, then you don't pay tax & NI on it, which means it doesn't count as earnings.

But, what if you're making it from your NET salary? You already paid tax & NI on it, so I think it should be counted as earnings.

[AccountantMatthew]

Just to clarify my earlier post - I'm coming at it from the point of view of an accountant and not the UKBA.

You've mentioned in previous posts that you have called the UKBA and have written to them so ultimately go with what they say. It may be that their definitions differ from that of an accountant/business advisor/solicitor/lexicographer/anyone else but it's their rules so they can define what they want how they want.

You should also refer to your contract of employment as mentioned above.

From a tax point of view, you do get taxed on your pension - not when you make a contribution but when you actually receive your pension money (there are ways to reduce what you pay and you do get an annual allowance but this is going way off topic if I go further).

If you make a contribution from gross salary then it is not counted as taxable pay (hence the difference in gross pay and taxable pay); if you make a contribution from net salary then the pension provider claims the tax back from the government back at 20% basic rate so the ultimate position is the same as with paying your contribution from gross salary.

[nks]

Just to clarify my earlier post - I'm coming at it from the point of view of an accountant and not the UKBA.

You've mentioned in previous posts that you have called the UKBA and have written to them so ultimately go with what they say. It may be that their definitions differ from that of an accountant/business advisor/solicitor/lexicographer/anyone else but it's their rules so they can define what they want how they want.

You should also refer to your contract of employment as mentioned above.

From a tax point of view, you do get taxed on your pension - not when you make a contribution but when you actually receive your pension money (there are ways to reduce what you pay and you do get an annual allowance but this is going way off topic if I go further).

If you make a contribution from gross salary then it is not counted as taxable pay (hence the difference in gross pay and taxable pay); if you make a contribution from net salary then the pension provider claims the tax back from the government back at 20% basic rate so the ultimate position is the same as with paying your contribution from gross salary.

Thank you for your valuable feedabck. I am still waiting for UKBA to reply on this but your points about payslip in earlier post give some food for thought. My payslip do not distinguish between types of benefit. Its made up of 2 sections : Payments & Deduction
"Payments" has 'Base pay' & 'Benefits Funding'
"Deductions" has all other standard deductions(NI, Tax) & 'Benefits Deduction'

Now since 'Pension' is part of Benefits, 'Total Gross' is about 500 pounds more than 'Total Taxable'.
Technically, UKBA declares, we will look at 'Total Gross' but then adds 'before tax'. And this leaves it to interpretation of case worker leading to various stories of distress and success.

Do you agree?

Cheers,
nks

[IsraGuest]

Hi,
I am in a similar situation.
Was there any resolution from UKBA on this?

[manojk005]

Hi,
I am in a similar situation.
Was there any resolution from UKBA on this?

If your pension contribution is declared on your slips the just get a letter from employer stating that your contribution to pension is part of your gross salary. This applies only to your contribution NOT employer contribution. I had pension salary sacrifice during initial application and pension contribution was accepted by UKBA as my earning.

[rakeysh.patel]

Thumb Rule -

Anything that appears on your salary slip and you pay tax on - Can be used as your Income to claim the points

Anything else - SIMPLY NOT

[silverline]

Let me make it simple.

1. UKBA will not consider your employER pension contribution while awarding earning points.

2. You will get points on your Gross earnings, irrespective of the fact that you have paid net pension contribution i.e. after tax or Gross pension contribution i.e. before tax. Gross earnings will be used to calculate earnings points.

3. Immigrants are allowed to participate in salary sacrifice i.e. Childcare Voucher, Pension (employee contr) etc and any tax benefit received out of such salary sacrifice scheme will NOT affect when they claim earning points on for gross earnings.

Basically you legally reduce your tax liability when contributing towards pension or any other salary sacrifice.


In nutshell, FORGET ABOUT PENSION CONTRIBUTIONS. and FOCUS ON GROSS EARNINGS.

[rfd]

Hi,

I am in a similar situation and extremely confused about this pension issue. On my pay slip the pension deduction appears on the payments column but the amount displayed is -ve.
For e.g on my payslip

Basic Pay: £1000
Pension: -£100
Gross: £900

In this case can I only claim £900 as my income or I can claim full £1000.00???

If I am only allowed to claim £900 then I will fall short of the required threshold, can anyone please shed some light / Share their experience ???

[nks]

Wordings here are very important. If the payslip says :

Gross: £900

then in my opinion, its only £900 you can claim.

[silverline]

Hi,

I am in a similar situation and extremely confused about this pension issue. On my pay slip the pension deduction appears on the payments column but the amount displayed is -ve.
For e.g on my payslip

Basic Pay: £1000
Pension: -£100
Gross: £900

In this case can I only claim £900 as my income or I can claim full £1000.00???

If I am only allowed to claim £900 then I will fall short of the required threshold, can anyone please shed some light / Share their experience ???

There is no issue. You can claim points on 1000.

[silverline]

Wording has no relevance here.

[rfd]

Hi NKS,

Thanks for your quick reply. My point of view on this matter is that the deduction was made from the amount that was actually paid to me.

The gross only depicts the amount for which I have paid tax for hence pension is not included in it and I have read somewhere on this forum that you can claim points for the income which legally un taxable i.e Pension.

What are your thoughts on this ???
Would it help if I PM you copy of one of my payslips ??

Thanks

[rfd]

Thanks silverline your response is much appreciated. Just for peace of my mind would you be able to point me towards a document or any link on UKBA's website which covers this topic??

[cs95tdg]

rfd, based on your example the amount you can claim would be 1000, as this is what your employer pays you.

I too contribute towards a pension and have always included the basic pay when calculating previous earnings. I have done this twice based on my understanding of the Tier 1 Guidance & never had an issue with the UKBA. I.e. I was always awarded the points I claimed. I always highlight the basic pay amount on my payslips and include a cover letter for clarity with my applications.

The fact that you contribute towards a pension is irrelevant & has no effect here.

The UKBA reference I used is under point 92.

"We will assess an applicant’s earnings. If an applicant is in salaried employment, (including a Director of a company for example) we will assess the applicant’s gross salary before tax."
http://www.ukba.homeoffice.gov.uk/sitec ... idance.pdf

[Humber12]

rfd, based on your example the amount you can claim would be 1000, as this is what your employer pays you.

I too contribute towards a pension and have always included the basic pay when calculating previous earnings. I have done this twice based on my understanding of the Tier 1 Guidance & never had an issue with the UKBA. I.e. I was always awarded the points I claimed. I always highlight the basic pay amount on my payslips and include a cover letter for clarity with my applications.

The fact that you contribute towards a pension is irrelevant & has no effect here.

The UKBA reference I used is under point 92.

"We will assess an applicant’s earnings. If an applicant is in salaried employment, (including a Director of a company for example) we will assess the applicant’s gross salary before tax."
http://www.ukba.homeoffice.gov.uk/sitec ... idance.pdf

This is very helpful posting...
Could you however tell me how you have proved the before tax pension to home office. Obviously it will not show in salary slip as in mine.......one confirmation we can get is from HR. What could be the 2nd supporting document.
Our company pension operates through external chanel do you think a letter from them can be provided as second supporting document.
Thanks in advance!

[rfd]

Guys thanks for your replies they have been very helpful.

I have been discussing this with other people as well and some people are quite firm that if £900 is shown as a gross on your payslip (as it does in mine) than UKBA will only consider £900 as gross. As its the only amount for which tax has been payed.

So my question is, is it absolutely necessary to declare the amount for which the tax has been paid??? Is UKBA strictly going to ignore any amount for which tax is not payed???

I also have a letter from my employer stating that my annual salary would be say 12K or £1000 pcm. If I consider the above situation that my gross is £900 than wouldnt it be contradicting with my employment contract which says I am getting £1000.

What would be the best way to tackle this issue ??

As always your help will be greatly appreciated.

[geriatrix]

There is no issue here, you are just imagining one.

1. Your contribution to pension fund is paid from your salary - salary that an employer is legally bound to pay you under the terms of your employment contract.
2. It is also not an "expense".

Simple, to the point answer - 1000.00. Period!

[rfd]

rfd, based on your example the amount you can claim would be 1000, as this is what your employer pays you.

I too contribute towards a pension and have always included the basic pay when calculating previous earnings. I have done this twice based on my understanding of the Tier 1 Guidance & never had an issue with the UKBA. I.e. I was always awarded the points I claimed. I always highlight the basic pay amount on my payslips and include a cover letter for clarity with my applications.

The fact that you contribute towards a pension is irrelevant & has no effect here.

The UKBA reference I used is under point 92.

"We will assess an applicant’s earnings. If an applicant is in salaried employment, (including a Director of a company for example) we will assess the applicant’s gross salary before tax."
http://www.ukba.homeoffice.gov.uk/sitec ... idance.pdf

HI cs95tdg,

Do you still have a copy of the cover letter you used?

[cs95tdg]

rfd, based on your example the amount you can claim would be 1000, as this is what your employer pays you.

I too contribute towards a pension and have always included the basic pay when calculating previous earnings. I have done this twice based on my understanding of the Tier 1 Guidance & never had an issue with the UKBA. I.e. I was always awarded the points I claimed. I always highlight the basic pay amount on my payslips and include a cover letter for clarity with my applications.

The fact that you contribute towards a pension is irrelevant & has no effect here.

The UKBA reference I used is under point 92.

"We will assess an applicant’s earnings. If an applicant is in salaried employment, (including a Director of a company for example) we will assess the applicant’s gross salary before tax."
http://www.ukba.homeoffice.gov.uk/sitec ... idance.pdf

This is very helpful posting...
Could you however tell me how you have proved the before tax pension to home office. Obviously it will not show in salary slip as in mine.......

I'm not entirely sure I understand your question here. Though from your comment I suspect your payslip breakdown may be different to mine. In my case my payslips have always contained the following breakdown along with other information (I.e. other taxable benefits, tax paid, NI contributions etc...):

1) Total monthly pay I receive from my employer before tax (generally referred to by many as Gross Pay)
2) Total monthly Employee Pension Contribution
3) Total monthly pay that is subject to tax.
4) Total monthly net pay

What is relevant when claiming points for previous earnings is the amount under point 1) above. What I have always done when applying is highlight amount 1) in all my payslips and use that total to claim points for my previous earnings. I additionally highlight 4) in my payslip & bank statement to make it easy for the case worker to verify my claimed previous earnings in the two sources of evidence (I.e. in my case payslip & bank statement) & include a cover letter explaining what I have done.

Note that my understanding of the Tier 1 guidance is that they tell you that they will assess the applicant’s gross salary before tax to avoid confusion. I.e. otherwise an applicant may think they can only claim points for their net pay. I see many applicants over-complicate this simple calculation, but it may be that you need additional documentation to support your application if your payslip does not contain the breakdown I have mentioned. Note that there is no requirement to provide evidence for the pension contributions you make as it is not relevant here.

[cs95tdg]

rfd, based on your example the amount you can claim would be 1000, as this is what your employer pays you.

I too contribute towards a pension and have always included the basic pay when calculating previous earnings. I have done this twice based on my understanding of the Tier 1 Guidance & never had an issue with the UKBA. I.e. I was always awarded the points I claimed. I always highlight the basic pay amount on my payslips and include a cover letter for clarity with my applications.

The fact that you contribute towards a pension is irrelevant & has no effect here.

The UKBA reference I used is under point 92.

"We will assess an applicant’s earnings. If an applicant is in salaried employment, (including a Director of a company for example) we will assess the applicant’s gross salary before tax."
http://www.ukba.homeoffice.gov.uk/sitec ... idance.pdf

HI cs95tdg,

Do you still have a copy of the cover letter you used?

Please see my previous response to Humber12 regarding what I used the cover letter for, it had nothing to do with pension contributions, but purely to explain the items I highlighted in my two forms of evidence (payslip & bank statement) for easier verification & the pay amounts I used to claim previous earnings for. I repeat, it did not make any reference to pension contributions. I agree with sushdmehta, try not to over-complicate this & my previous response to you remains the same, i.e. the amount you can use towards previous earnings is "1000".