Back pay, tax and pension

[hugelyrippedoff]

Hello, after a massive battle, I have successfully fought and won a backdated payrise which should have been awarded to me 6 years ago. (long story)

Anyway the amount has just been paid in one lump sum which they are taking tax and national insurance from as if it was all this years pay, which is fair enough if that is how it works.

The problem that I have is that they are taking back payments of pension contributions for the new higher salary, for all of the previous years and it amounts to a fair sum.

I am arguing that they cannot treat my backpay as if it is this years salary for tax purposes but then treat it as previous years salary, for pension purposes, can they?

I will not benefit for paying the higher pension contributions for the previous years as it was then a final salary scheme, but last year this changed to a scheme where all contributions from that point went into a pot for the future so if the pension contributions went in as this years then it would actually benefit me, plus contributions are at a slightly lower rate now.

It would seem that I am being stung both ways, my salary will now look a lot higher this year meaning that I will owe back a lot of ctc, whereas if it was treated as previous years salary for the years it was actually meant to be for, then I didn't claim ctc so it wouldn't have affected anything.

I suppose my question is, can they do this? Can they tax it as this years salary and then take pension contributions as if it was previous years salary?

I am mad as hell with them, they have had this money for 6 years and earned interest on it when it would have really benefited my family to have had this extra pay when it was due but they withheld it and now they seem to want it all ways, in fairness my judgement might be a bit clouded.

Cheers.

[Emmzzi]

is the final salary your pension is based on for that period, the new salary? If so, fair dos.

[hugelyrippedoff]

No I think it is based on the salary when we leave or retire, but not entirely sure.

Can they base this payment on two completely different tax periods though, seems unfair if they can do, because why not class it as pay for that period then if they are taking the pension contributions for then, a time when I didn't have benefits to be affected, the way that have done it they get the extra input into their pension and I lose all my ctc for a year that the payment mostly doesn't even apply to.

Just saying that to me it should either all be classed to the relevant years or all apply to this year, pension contributions and all. Have just read online that the threat they made to me about it is wrong, so have no confidence that they are right.

Will ask CAB tomorrow. Thanks anyway.

[Emmzzi]

No I think it is based on the salary when we leave or retire, but not entirely sure.

 

Check, and come back... but it seems fair to me, you shouldn't get to pay less pension due to an accounting error, essentially.

 

I think you need to calculate what CTC would have been with the extra pay, and do a sum and show them the difference. You will hav been "overpaid" CTC in the past based on the salary you should have been getting, I suspect. Does your lump sum now compensate a bit?

[hugelyrippedoff]

I didn't claim ctc in the previous years that this payment mostly covers, so it would not have been affected. It wasn't an accounting error either, it was won in court.

[Emmzzi]

well, y'know, however it was come by, it's still right you pay in your share to the pension!

 

My question still stands, does the extra cash make up for the CTC reduction? Would you rather *not* have the lump sum?

[steampowered]

What did the court order say? If it was just an order for them to pay you a sum of money, I'm not sure they can deduct anything. Presumably you were awarded interest at 8% per year?

[hugelyrippedoff]

Thanks for the reply steampowered, the court just ordered my employers to pay me all of the payrises back to 2009.

I actually thought that I was to be taxed etc. as related to each year, I didn't realise that it would all be classed as this years salary and no I have not had any interest whatsoever.

 

Emmzzi, I do not think you are grasping what I am saying, I am not shirking my pension or tax responsibilities, I am pointing out that if the payrises had been awarded when they were due, I would have had some extra cash in my pay packet at that time, this way however I will owe most of the lump sum to ctc because it has all been piled onto this year salary.

If they are counting it as part of this years salary for tax and ni purposes then why aren't they counting it as this years salary for pension purposes? Likewise if they are taking pension for previous years then they should tax and ni it as previous years salary and i would not lose my ctc. They just want it both ways.

Of course I would not rather have never had the lump sum because it means that my salary is considerably more now, even if I barely have a penny left from the lump sum.

 

Anyway thanks for the messages, I have a CAB appointment this afternoon, they helped me to take this to court so they will know what if anything I can do.

[Emmzzi]

Because you are dealing with 3 seperate agencies who each set their own rules - none of which are your employer!pension = pensions trusteestax = HMRCbenefits = benefits agency (DWP in old money)CTC is a benefit to help those in need - your need seems to have lessened.

[hugelyrippedoff]

Ok you are obviously missing the point for whatever issue you feel that you have with me.

Well thank you for your messages anyway, of course you are right my employers are completely blameless in all of this! NOT.

[honeybee13]

Ok you are obviously missing the point for whatever issue you feel that you have with me.

Well thank you for your messages anyway, of course you are right my employers are completely blameless in all of this! NOT.

 

Hello there.

 

Fwiw, I also think that if you have a query over how the back pension contributions were calculated, you need to speak to the scheme trustees or the pensions manager. Not all HR people understand pensions in depth, with the best will in the world, especially final salary schemes.

 

If you want to pursue the ins and outs of CTC, it would be better to have a separate thread on that in the HMRC forum.

 

HB

[steampowered]

Thanks for the reply steampowered, the court just ordered my employers to pay me all of the payrises back to 2009.

I actually thought that I was to be taxed etc. as related to each year, I didn't realise that it would all be classed as this years salary and no I have not had any interest whatsoever.

Hi

 

Can you please post the exact wording of the court order? If it is simply an order for the employer to pay a fixed amount, that is what has to be paid and they would have to go back to court to amend the order if any deductions are required for tax or pension contributions or otherwise.

 

The legal is that the employer was wrong in not paying you the money. The employer was in breach of contract. When you are a victim of a breach of contract, you are entitled to be put back in the same positon you would have been in had there been no breach of contract.

 

If it turns out to be the case that paying you all the money this year means that you end up paying extra tax or pension contributions than if the money were paid when it should have been - then that is a cost for the employer, because it was their fault that you weren't paid .... and the employer would have to gross-up the amount so that you are not left out of pocket.

[ericsbrother]

if they are correctly allocating the money to an increase in the final salary scheme then I would be happy about this. If they are just bunging money into a stand alone pot I would question its allocation

[Emmzzi]

Can I check - when you posted last year you had been laid off. Have you been reinstated with backpay and pay rise? This may also affect the advice on benefits. People need to know the judgement wording and the full position to advise properly.