[Solved] CMS and Employer Pensions / Private Pensions

This might help - it's a guideline only, so if you stick to slightly less, you've got less chance of being pulled up on it.

https://www.whatdotheyknow.com/request/565189/response/1346846/attach/html/2/PLDMG%20Diversion%20of%20income%2013017.docx.html

This is where I found the info

https://www.whatdotheyknow.com/request/cms_maximum_pension_allowance_ca#incoming-1346846

so i've increased my contribution to 12%, employer still pays 3%
pensions started in 2015, i was 34/35 at the time

does that mean that now i can pay pension (16 - 22% of my gross?)

thanks?

As I said, these are guidelines, and they are taken on a case-by-case basis. I suppose you have the option of paying up to this level in pension, and if it goes against you, reduce your pension again (or to a level they will allow).

Hi Mr Goldmine,
I saw your post and it reminded me of an issue I have had with the CMS.

Basically, I've been paying CMS since 2014, always been in my workplace pension. I have increased my pension over the years up to 5% in line with government guidelines in order to get the maximum contribution from my employer. I always assumed that the CMS automatically accounted for my pension. (Spoilers: they didn't)

Last year when I had my annual review, I noticed that the figure that they had used to calculate my payments was my top line, (£40k) BEFORE pension deduction. I rang them and the lady assured me that pension had been taken off but repeated that they used £40k. She insisted that this was my earnings AFTER pension was deducted. I assured her that it most certainly was not but she wouldn't have a bar of it.

After many phonecalls to CMS, DWP, my pension provider and my employers wages department (all of which where blaming one another), I kind of figured out the problem. I learned that my pension was what is known as a 'relief at source' scheme. This means that it is taken from my salary and put into my pension pot AFTER tax is applied (therefore, I have paid tax on my pension contribution). Once it is in my pot, my pension provider claims the tax back from the inland revenue a d this also goes into my pot.

This 'relief at source' type of scheme seems to cause problems as I don't think that the CMS automatic calculation is set up for this type of scheme. They take your earnings as everything that you are taxed on, and as you are taxed on pension contribution initially (although it is claimed back later by pension provider!), your pension is not deducted before they calculate your payment.

I called them back to explain all of this but they would not have it. So I had my pension company send me a full breakdown of all my pension payments (including tax relief) for the last 5 years. I sent those in to the VMS in the form of a complaint. They replied and said that I only began paying into my pension a few months ago and therefore those contributions will be accounted for in next years review! I have no words. They clearly did not read my letter nor look at the 5 years of pension statements I had provided. So I took it further and started a court application. Before we where due in court, they sent me a letter briefly saying that they had adjusted my payments and did not need to go to court. No apology or any other explanation.

I had to check the online portal to learn that my payments had been reduced, so eventually it was a good outcome.

I fully expect the same issue this year as when I rang the CMS for an explanation, she said that she couldn't understand why they had reduced it and still insisted that it had been correct in the first place. These people are unbelievable!

So the moral of the story is:

-Check the figure that they have used to calculate your payments, it should be less than your gross; add up all your total earnings BEFORE any deductions for the whole year. If that is the same figure that they used, you are paying too much maintenance.

-Contact your pension provider to find out if you are in a 'relief at source' scheme (there was no info about this on my annual statement, I had to find this out for myself).

I hope this helps because I had a nightmare with it 😮

Hi Cooldad, a possible solution to this is to do a salary sacrifice - there are additional benefits to this for both you and your employer, since your salary is lower, both employers and employees national insurance contributions are lower. It's perfectly legal and accepted by HMRCS. This would mean that instead of your salary being £40k, it would show as £38k (assuming 5% reduction - you can of course pay in more to a workplace pension). Your employer would still record a reference salary of £40k purely for pay rises based on salary etc, but as far as CMS and HMRCS are concerned, you are earning £38k.

The only time salary sacrifice isn't worth doing is if you are on certain benefits, so it's always worth getting advice on this, but whoever runs the scheme for your employer should be able to give you at least basic information.

:side:

Thanks for the replies.

I have since spoke to CMS, They checked HMRC records while on the phone and confirmed non of the salary sacrifice for my pension payments were being taken into account in the CMS calculation. The gross pay before pension was the income declared by HMRC when they checked. He says it should be lower and normally pension payment is itemised when HMRC decalre income to the CMS... in my case it was not....

he did mention that any salary sacrifice/payment for pension should be made obvious on the payslip or submitted correctly to HMRC in order for them to categorise it correctly.

They asked for payslips for which I have sent over today for the past 2 years that I have been paying maintenance.

i do hope there is a reform soon and a better one too... some call centre agents literally don't know what day it is, what they are saying or even forget and get mixed up with who they are talking to.

lets see what they say after reviewing my payslips eh?

Your pension scheme sounds like a 'RELIEF AT SOURCE' scheme, like mine.

If so, your pay slips will probably show the contributions that you have made but don't forget that you have been taxed on those contributions too at 20% basic rate plus NI contribution. That should be claimed back by your pension provider and put into your pension pot, so your ACTUAL pension contribution is 20% + NI HIGHER than what is shown on your wage slip.

You should speak to your pension provider about this and ask them to send you a 'CONTRIBUTION RECEIPT' that will show the total of your initial contributions AND the reclaimed tax - the CMS need to deduct this TOTAL figure from your income BEFORE they calculate how much you need to pay.

There must be loads of people being caught out by this who don't even realise it.

Hi

Just to clarify, although tax and Ni has come off, the pension provider only claim back the tax and so it is pension paid plus the tax that needs to be deducted but not the NI?

It can't be easy for CMS to figure this out... Lol...

New to this so bare with me. I've recently retired and taken the 'lump sum' which thankfully is all mine and my mort. bills etc have been cleared.
I am now in receipt of my monthly pension as my only source of income.
Am I correct in saying that the CMS can only take into account my current monthly pension(income),when they make their CMS calculations.TIA

hi,

from what I read you would have to pay maintenance out of your pension, if your getting at least £100 a week from it.

pg. 38 - how we work out child maintenance

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/672432/how-we-work-out-child-maintenance.pdf

They rejected my claim on the basis that my contributions were not showing on the contribution receipt.

the contribution receipt combines my salary sacrifice and employers contributions within one column, it clearly states
.

Employer
(includes any
payments from the
employee)
.

i gave wage slips and everything, they still refused.

i am going to resubmit again with a email from my pension provider which explains that my contributions are combined with the employers highlight the above.

they processing these with their eyes closed or something or where they right to reject my claim.

my payslips show my salary sacrifice and how much my employer was paying into the pension, yet they still rejected.