SMART Pensions. A smarter way to pay your pension contributions

Transcription

1 SMART Pensions A smarter way to pay your pension contributions

2 SMART Pensions A smarter way to pay your pension contributions Contents Introduction Glossary of Terms Understanding how SMART Pensions works Payslip Design Who is eligible to join SMART Pensions Pay Protection Limits Examples of Savings Impact on Company Benefits Impact on State Benefits What to do now Frequently asked questions Glossary of Terms SMART In relation to SMART Pensions, this stands for Save Money And Reduce Tax Reference salary This is your current contractual gross salary or hourly rate before SMART Pensions. Smart salary This is your new contractual gross salary or hourly rate after SMART Pensions. SMART Pensions Adjustment This is the amount your Reference salary will be reduced by, to arrive at your new Smart salary. The value of the SMART Pensions Adjustment is equal to your normal pension contribution. Gross pay This is the amount you are paid before any deductions (i.e. before tax, National Insurance contributions, SIP, GAYE and any other deductions from pay are taken.) Last updated: June 2018

3 Introduction Members of the Clarks Flexible Savings Plan can take advantage of SMART Pensions a smarter way of paying your pension contribution that won t affect your Clarks pension benefit but will increase your take home pay. SMART Pensions is a salary sacrifice scheme and is designed so that almost all eligible members will benefit and will want to be included. You don t have to do anything to participate, as you will be included automatically in SMART Pensions, however if you don t wish to take part in this benefit then you have the option to opt out. This leaflet explains in more detail how SMART Pensions works with a section for any questions you may have at the end. More information is available on the SMART Pensions page on the Clarks Intranet and there is an opportunity to any specific questions to a dedicated address. The purpose of this booklet is to inform you of the details of SMART Pensions so you may decide if you are happy to stay opted in and benefit from SMART Pensions or whether there are any reasons for you to opt out. By taking part in SMART Pensions you will be agreeing to a change in your contractual terms and conditions of employment and Gross pay, so please ensure you read this leaflet carefully. Understanding how SMART Pensions works SMART Pensions is a way of increasing your take home pay by reducing the amount you pay in National Insurance contributions. You will stop paying your normal pension contribution to the Clarks Flexible Savings Plan Your current Gross salary (now known as your Reference salary) will be reduced by the same amount as your normal pension contribution. This reduction is known as your SMART Pensions Adjustment. This will leave you with a new lower Gross salary (known as your Smart salary) on which your National Insurance contributions will be calculated Clarks will pay the equivalent value of your SMART Pensions Adjustment into your pension scheme as an increased employer contribution meaning your pension benefit will not change. Your Reference salary will be used for the calculation of any salary related benefits, e.g. bonuses, overtime, pay reviews, etc. Your Reference salary will also be used to calculate salary related employee deductions, e.g. Share Incentive Plan (SIP), Give As You Earn (GAYE) and Additional Voluntary Contributions (AVC s), so the amount of these contributions will not change. You will be able to see both your Reference salary and the SMART Pensions Adjustment on your payslip. This is a change to your terms and conditions of employment because contractually your Gross pay is reduced by the same amount that you are currently paying in normal employee contributions into the Clarks Flexible Savings Plan. Contractually your Gross pay is now your new Smart salary or Smart hourly rate (if you are hourly paid).

4 If you are a member of the Share Incentive Plan, taking part in SMART Pensions means you are also agreeing to a change to the terms of your Partnership Share Agreement. As your SIP contributions will be calculated on your Reference salary, the amount of your contributions will not change. Payslip design In the below example, we have assumed that you earn 25,000 per year and have been paying normal pension contributions of 4% of earnings ( 1,000 per year) into the Clarks Flexible Savings Plan. Current payslip layout Payments Deductions Basic Pay 25,000 Tax National Insurance Pension contribution 2, , , Total Gross Pay 25,000 Total Deductions 5, Net Pay 19, Reference salary New payslip layout With SMART Pensions, you stop paying your pension contribution and Clarks increases its employer contribution to your pension scheme by the same amount. Your Gross Pay is reduced by the amount of your pension contribution (called the SMART Pension Adj ). Payments Ref: Basic Pay SMART Pension Adj 25,000-1,000 Deductions Tax National Insurance 2, , Total Gross Pay 24,000 Total Deductions 4, Net Pay 19, As your Gross pay has reduced, your National Insurance contributions are lower and consequently your take home pay (Net Pay) increases by in this example. Clarks increases its pension contribution by 1,000, which means the pension scheme receives the same amount of funds. The increase in your take home pay will vary according to your current pay, your normal pension contribution and your National Insurance rate. The amount of income tax you pay will not change under SMART Pensions.

5 Who is eligible to join SMART Pensions Any employee who joins the Clarks Flexible Savings Plan will be automatically opted into SMART Pensions. If you do not wish to pay your pension contributions through SMART Pensions then you need to tell us at least two weeks before the first pension contribution is due (your pay day). Once in SMART Pensions, you can only opt out once per year on the scheme anniversary date, 6 th April, unless you are impacted by a Lifestyle Change - a significant event in your life that may cause you to reconsider your financial arrangements. Lifestyle changes may include the birth of a child, separation or divorce (see the Frequently Asked Questions section for more information on Lifestyle Changes). If you have previously opted out of SMART Pensions, you can rejoin the scheme on 6 th April each year. Pay Protection Limits Pay Protection Limits are fixed cash amounts set in the payroll system that are designed to protect employees from being disadvantaged by taking part in SMART Pensions. There are two Pay Protection Limits the first checks that your Smart salary or hourly rate is not below the Adult National Living or Minimum Wage. The second checks that your Smart salary or hourly rate is not below the level which would impact on the amount of any Statutory Payment for maternity, paternity, adoption or sickness leave. Clarks has structured SMART Pensions so that almost all employees who are members of the Clarks Flexible Savings Plan will benefit from taking part. Each pay period the payroll system will check to make sure that your Smart salary remains above the Pay Protection Limits we ve set and will automatically opt you out should your pay drop below those limits. If you are automatically opted out because of this then you will go back into SMART Pensions on the next pay period where your Smart salary or hourly rate is above the Pay Protection Limits. Example of savings The table below gives you an indication of how much your take home pay could increase by per annum, by taking part in SMART Pensions. The amount you can save will vary depending upon which pension scheme you are in, your pension contribution, how much you earn and the rate of National Insurance you pay. Increase in take home pay with a Increase in take home pay with a Basic pay 4% pension contribution into 7% pension contribution into per year Clarks Flexible Savings Plan Clarks Flexible Savings Plan 8, , , , , The amount you can save will reduce at higher pay levels because your National Insurance contribution rate reduces when you earn above the Upper Earnings Limit for National Insurance.

6 Impact on Company Benefits Taking part in SMART Pensions will not reduce any of the salary-related benefits you receive from Clarks. All future pay rises will continue to be based on your Reference salary or hourly rate. Your Reference salary or hourly rate will be used to calculate your bonus, overtime, pensionable pay, death in service benefits, Share Incentive Plan contributions and so on. Mortgage reference letters will show your Reference salary or hourly rate. Impact on State Benefits The Pay Protection Limit set by the company is designed to protect you from any impact on your state benefits such as statutory sick pay, employment and support allowance, statutory maternity, paternity or adoption pay. Benefits such as housing benefit, income support and family tax credits may be impacted where they are based on net pay see the Frequently Asked Questions section for more information. Your Basic State Retirement Pension will be unaffected by taking part in SMART Pensions. What to do now You don t have to do anything to participate in SMART Pensions as you will be entered into the scheme as soon as you join the Clarks Flexible Savings Plan. If after you ve considered the benefits of SMART Pensions, you wish to opt out then you can do so by completing and returning the SMART Pensions opt out form at least two weeks before your first pension contribution payment is due (your pay day). Once opted out of SMART Pensions your pay remains as is and you will make your pension contribution as a deduction from your pay. Once in SMART Pensions, you can only opt out once per year on the 6th April unless you have a significant lifestyle change such as birth of a child, separation / divorce or a change to your working hours (i.e. from full time to part time), that has caused you to reconsider your financial arrangements. In such cases you can opt out with the Company s agreement by completing an opt out form which can be obtained from the SMART Pensions intranet site.

7 Frequently Asked Questions Q. Why does Clarks offer SMART Pensions to employees? A. A number of other large employers such as the BBC, Tesco, Boots and Asda offer SMART Pensions to deliver savings to their employees and their business, and we wanted to offer the same opportunity. We introduced the scheme having taken advice from our tax and pension advisers. Q. How long will SMART Pensions last? A. SMART Pensions arrangements have been around for a number of years, and Clarks have offered them since We will run SMART Pensions for as long as legislation allows us to do so, or we feel it appropriate. If it is no longer viable to continue to run SMART Pensions, then we will withdraw SMART Pensions with or without notice in the future. If this happens then contractually your terms and conditions of employment will change so that your Gross pay will return to the level it was at before the SMART Pensions Adjustment was taken, and you will start making pension contributions again. You will not have to pay back any of the benefits you received while SMART Pensions was in place. Q. Does Clarks benefit from SMART Pensions? A. Yes, Clarks employers National Insurance contributions are also reduced as a result of SMART Pensions. Q. Were the Trade Unions consulted on SMART Pensions? A. Yes, we consulted both Unite and Community Trade Unions about Clarks running SMART Pensions when we first introduced the scheme. Q. Do you need HM Revenue and Customs approval to set up SMART Pensions? A. No, it is not necessary to have their approval before running such a scheme; however it is good practice and we have therefore demonstrated to HM Revenue and Customs that SMART Pensions terms are being correctly treated for tax and National Insurance purposes. Q. Why has Clarks decided to opt all members into SMART Pensions? A. We are opting in all members to ensure we get the maximum take up of the SMART Pensions arrangement, as we believe the majority of eligible employees will benefit. Q. Will this affect my Clarks pension benefits? A. No. SMART Pensions does not affect the amount of your pension benefit or the amount of your pensionable pay used to calculate your pension benefits. The amount of contributions paid into the scheme remains the same, but Clarks will be paying all of the contributions (the Company's normal contributions plus the contributions you would have paid).

8 Q. Are my one off Additional Voluntary Contributions (AVCs) included in SMART Pensions? A. No, one off AVCs are not affected by or included in SMART Pensions. Q. Can I contribute part of my pension contributions to SMART and leave the rest as is? A. No. To take part in SMART Pensions you have to agree to your entire regular pension contribution going into SMART Pensions you won t be able to split your contributions. However pension contributions such as one off lump sum AVCs and ISA contributions, are excluded from SMART Pensions. Q. If I am paying in to an ISA, can this also be paid through SMART Pensions? A. No. If you have chosen to have part of your pension contributions paid into an ISA then the amount of this contribution is not included in SMART Pensions. This is also the case where you are paying separately in to an ISA. This is because your ISA contribution is taken from your net pay (after Tax and National Insurance are taken). Q. Can I alter my pension contributions? A. Yes you can increase or reduce your pension contribution in accordance with the Rules of the Clarks Flexible Savings Plan. There is now no requirement to demonstrate a Lifestyle Change or hardship concerns. Any such increase or reduction is a further change to your contract of employment. Q. Why do I need to opt out of SMART Pensions before my first pension contribution is paid? A. HMRC rules mean you need to opt out of SMART Pensions before the first SMART payment is made. Therefore you have to notify us before the first payment if you do not wish to be in SMART Pensions. Given the payroll cut off deadline, we need at least two weeks notice before your pay day to be able to process your opt out form. Once in SMART Pensions, you can only opt out on 6 th April each year unless you have a lifestyle change. Q. Will my employment contract terms and conditions change? A. Yes, although SMART Pensions does not alter any other terms of your contract of employment, it does mean that your contractual Gross pay is reduced by the amount of the SMART Pensions Adjustment and that instead of you paying your pension contribution, the Company increases the level of its contributions into the Clarks Flexible Savings Plan. Q. I don t want to be in SMART Pensions anymore, when can I opt out? A. You can only opt out of SMART Pensions once per year on the 6th April which is our scheme anniversary date. You can however opt out of SMART Pensions outside of this date if you have had a lifestyle change and the Company agrees to your request to opt out.

9 Q. I ve previously opted out of SMART Pensions and wish to opt in again when can I do this? A. You can opt back into SMART Pensions (assuming you meet the eligibility criteria) on the annual renewal date (6th April). Outside of this date, it may be possible for you to opt in to SMART Pensions because of a lifestyle change reason if the Company agrees to your request. Q. What is a Lifestyle Change? A. Lifestyle changes are significant events in your life that may cause you to consider opting out of or opting in to SMART Pensions. You can apply to opt in or opt out of SMART for reason of a lifestyle change using the form available on the SMART Pensions intranet site. Your request to opt in or opt out will then be considered by the Company you may be asked to provide proof of the event in order for your request to be approved. Examples of lifestyle changes include birth or adoption of a child, separation / divorce, moving house, long term illness of you or a family member, hardship, international assignment, significant reduction in contracted hours (i.e. full time to part time) etc. Please contact a member of the Reward team for more advice on lifestyle changes ( Reward@Clarks.com). Q. I am opted into SMART Pensions, but I can t see anything different on my payslip why? A. If Ref: or SMART Pensions Adj does not appear on your payslip or is blank, then this probably means your Smart salary or Smart hourly rate for that pay period has dropped below the Pay Protection Limit and you have been automatically opted out of SMART for that pay period. There should be a message on your payslip below the payments window telling you if this is the case. If there isn t a message and SMART isn t showing correctly on your payslip, then please contact a member of the Payroll team for advice ( UkPayrollTeam@Clarks.com). Q. My partner/spouse works for Clarks, can we both take part in SMART Pensions? A. Yes, as long as you both meet the eligibility criteria then you are both able to take part in SMART Pensions. Q. Will my Holiday pay / Overtime pay / Company sick pay be impacted by SMART Pensions? A. No, your Holiday pay / Overtime pay / Company sick pay will be calculated based on your Reference salary or hourly rate. Q. Will my Statutory Maternity Pay; Statutory Adoption Pay; Statutory Paternity Pay; Statutory Sick Pay be affected by SMART Pensions? A. SMART Pensions will not affect any of these payments as we have set the Pay Protection Limit to a level that will safeguard these statutory payments.

10 Q. Will SMART Pensions affect Child Support Agency (CSA) assessments / Council Tax Orders / Scottish Arrestment s? A. These are usually based upon your net pay which will increase under SMART Pensions so there may be an impact and you may need to consider opting out. If you need advice you should contact the CSA, your legal representative or the Citizens Advice Bureau for more information. Q. Will SMART Pensions affect student loan repayments? A. Yes, because your Gross pay is reduced under SMART Pensions, your payments will also reduce slightly and the repayment period will be increased. Q. How will Mortgage or Tenancy reference letters be affected? A. Reference letters the Company provides for Mortgage or Tenancy applications will show your Reference salary or hourly rate. Q. How will State Benefits outside of employment be affected? A. Benefits such as Housing Benefit; Income Support; Family Tax Credits, can take into account both gross and net pay and could therefore be impacted under SMART Pensions so you may need to consider opting out. If you need advice then you should contact the Department for Work and Pensions for more information. Q. How will SMART Pensions affect my P60? A. Your P60 shows your Gross pay which is now reduced under SMART Pensions so you need to be aware of this if you use your P60 as a means of declaring your earnings for the purposes of applying for a loan or grant, for example. You should inform a lender that you take part in SMART Pensions (a salary sacrifice arrangement) and use your payslips to show your Reference salary. Q. I earn over 110,000 and so may be impacted by the tax relief rules on high earners pension contributions (in effect from April 2011) how will SMART Pensions affect this? A. It is unlikely that SMART Pensions will have any impact on how you are affected by the new tax relief rules for pension contributions however you may wish to seek further advice. Q. What happens if I am made redundant? A. We will always try to avoid redundancy situations, however if it is impossible to avoid then Company redundancy payments will be based on your Reference salary, so you will not be negatively impacted by being in SMART Pensions. Q. What happens if I am assigned to work outside of the UK for a period of time? A. If you are on a short term international assignment outside of the UK (i.e. less than 1 year) then you will still be able to take part in SMART Pensions. If your international assignment is expected to be or goes over 1 year, then you will not be able to take part in SMART Pensions and will therefore be opted out.

11 Q. I live on the Isle of Man, Jersey or in the Republic of Ireland Why am I not able to take part in SMART Pensions? A. SMART Pensions is permissible under UK tax legislation. As this legislation does not apply to the Isle of Man, Jersey and the Republic of Ireland, you are not able to take part in SMART Pensions. Q. I m over the State Pension Age, will I benefit from SMART Pensions? A. No, because you no longer pay National Insurance contributions, however you will still be opted into SMART Pensions because the Company still has to pay National Insurance and so will benefit. Do you have more Questions? Send your questions to HRSupportCentre@Clarks.com