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Find out more'Why can't I add more to my pension?'
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I asked to pay 12% of my income into my employer’s pension scheme after taking advice from an independent financial adviser.
My employer has since told me this isn’t possible as it would take my remaining salary below the minimum wage.
My understanding is I can put 100% of my income into a pension. What are the rules?
Kathy from Stockport
'You still need to be paid at least minimum wage'
Joanne Padilla, Which? Money expert, says...
Many of us aren't contributing nearly enough to our pensions, so your intention to add more is to be applauded.
You’re correct in thinking that you can pay in the equivalent of 100% of your annual earnings into your pension each tax year ( as long as it doesn’t exceed £60,000).
This is known as the annual allowance and is the maximum you can save while still benefiting from tax relief on your contributions. If you have no earnings, you can get tax relief on contributions up to £3,600 a year.
But, employers are legally required to pay you at least minimum wage (£12.21 an hour for an adult aged 21 or over) after factoring in your pension contributions.
In your case, paying 12% of your income into your pension would take your remaining earnings below the minimum wage threshold, so your employer can’t accept your request.
Paying 12% of your income into your pension would take your remaining earnings below the minimum wage
There are other ways to boost your retirement pot. For example, your scheme may allow you to pay in a lump sum from savings, or you could set up a separate pension and pay any income you don’t need into this.
You’d still get tax relief, but you wouldn’t benefit from extra employer contributions as you would if you were increasing contributions from your salary into your workplace scheme (as your employer matches employee contributions).
Remember the annual allowance for pension contributions applies across all your private pensions (not per pot) and it includes contributions made by you, your employer and anyone else, plus tax relief.
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