PTC - pension confusion

swirlywirly Registered Posts: 26 Regular contributor ⭐
I am looking through the Osbourne book and found the following statement on pg 4.16:

"Contributions that an employee makes to an approved pension scheme are allowable deductions within employment income."

Does this mean that contributions to ANY type of pension are deductable? Including personal pensions (I thought they weren't due to paying net)? Or is it only if you are paying gross contributions, i.e. occupational? (I understand what happens when you pay net to a personal pension)

It does go on to say "If the contributions are made to a scheme run by the employer..." - note the IF. Which suggests there are other schemes where you may make contributions gross??

Thanks and sorry if this is muddled (a bit like my brain at the moment).


  • Cyfarthfa
    Cyfarthfa Registered Posts: 62 Regular contributor ⭐
    Hi Swirly,

    You take occupational pension contributions made by the employee off their income.

    For private pensions, you need to gross up and increase the tax band by this amount. Therefore they get higher tax relief. This is the bit that confused me as this only happens if the employee is a higher tax payer and if they are not in the higher tax band then you deduct conts off their income and I'm assuming that you gross this up too.

    I have done past paper after past paper and gone through the kaplan book for the 2nd time today and I think what the AAT have done is that if they are making conts into a personal pension scheme this will always involve increasing the tax band by gross amount. You do the same for donations to charity.

    It would be good to get some clarity on this area as my current understanding is just to get me through the exam!
  • swirlywirly
    swirlywirly Registered Posts: 26 Regular contributor ⭐
    Thanks Cyfarthfa, I think I understand it now. It's just the way it's worded in the book!!
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