Employer contributions to pension schemes in the UK

Question

What are the investment options available to the employee when an employer contributes to a pension scheme for the employee? Can one invest in US ETFs, mutual funds, and stocks? Does this contribution count towards the £40000 annual limit? Does the national insurance charge then apply on the remainder of the salary? Also, does this contribution count towards tax relief at source for both income tax and the national insurance tax?
Consider the following examples (numbers were calculated from tax.service.gov.uk).
Annual salary: £20000
Income tax: £1498
National insurance: £1260
Total tax: £2758
Annual salary: £60000
Income tax: £11498
National insurance: £5060
Total tax: £16558
Do these mean that if I draw a salary of £60000 I would end up saving in taxes £16558 - £2758 = £13800 if I have the employer contribute £40000 to a pension scheme instead of paying me directly?

Robert Longson · Answer

The investment options for employer contributions are generally the same as for your employee contributions. What you can invest in depends on your scheme's specifics.
Employer contributions count towards the limit so the sum of your contributions, including any additional voluntary contributions and employer contributions needs to be within the limit.
The rest of the questions depend on the specifics of the pension scheme your employer offers, i.e. salary sacrifice or not. Some employers set up their schemes as salary sacrifice, some don't. Salary sacrifice is better for you as you don't pay National Insurance on your contributions.

Employer contributions to pension schemes in the UK

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