Salary Exchange for your pension. Our Post Office, your rewards

Transcription

1 Salary Exchange for your pension Our Post Office, your rewards 1

2 This booklet contains important information for Post Office colleagues who are being automatically included in Salary Exchange for pension contributions from 1st November It tells you about Salary Exchange, what you need to know and how you could potentially make savings. You can also access more information via the Salary Exchange section of the Pensions website onepostoffice.co.uk/pensions. Please contact HRSC with any questions about what this could mean for you. Important note: This booklet confers no right to continued membership of any Post Office Pension or other benefit programme or to participate in a salary exchange arrangement. Post Office reserves the right to withdraw, suspend or amend any of its pension or other benefit programmes, or the terms of Salary Exchange, at any time. Parts of this booklet summarise expected savings arising from Salary Exchange and the impact of Salary Exchange on certain state benefits. This is based on Post Office understanding the current HMRC law and practice and operation of state benefits. However, please note that these can change from time to time. Salary Exchange for Pension explained Salary Exchange is a cost-effective way of making payments to your Post Office Pension Plan. It s an agreement between you and Post Office, where you agree to give up part of your salary in return for Post Office making pension contributions on your behalf. Eligible members can save money because National Insurance contributions are lower. You can find out more about who is eligible later in this booklet. This is how it works: Post Office will reduce your salary before tax by the amount of your pension contribution without changing your pension benefits in any way This sum is then added to the pension contribution made by Post Office and paid into your pension account monthly Reducing your salary before National Insurance contributions are paid increases your take-home pay The same amount goes into your pension, but your take-home pay is more because you pay less National Insurance (NI) Post Office continues to record your Pre-Exchange Pay, as your basic pay/salary, before any adjustment for Salary Exchange You continue to receive tax relief on your pension contributions. If you are a higher rate taxpayer you get the additional benefit of immediate tax relief at the higher rate so you won t have to claim it through your tax return From November, the contribution you currently pay will be paid as an employer contribution by Post Office Salary Exchange otherwise known as Salary Sacrifice is a commonplace arrangement in the UK that is designed to help many colleagues pay go further Taking part in Salary Exchange means that you will have accepted a change to your contractual terms and conditions of employment, as explained in more detail later in this booklet 2 3

3 How much could you save? For the majority of members of the Post Office Pension Plan, Post Office believes that Salary Exchange will result in an NI saving. We anticipate that nearly 90% of Pension Plan members would see an increase in take home pay. The amount of money saved depends on the rate of NI paid and how much members contribute to the Post Office Pension Plan. Current National Insurance limits mean that those earning above the Pay Protection Limit but less than 46,350 a year (on 2018/19 tax year rates and thresholds) benefit most from using Salary Exchange for their pension contributions. For earnings in excess of 46,350 a year, the National Insurance (NI) savings drop from 12% to 2%. Go to to use the online calculator to see how much you could save, based on your current contribution percentage rate and Post Office s understanding of current HMRC law and practice. You can also compare what it would cost if you were to reduce or increase your contribution rate. The average saving for Post Office Pension Plan members is 138 a year. How to opt-out All eligible members of the Post Office Pension Plan will automatically be opted into Salary Exchange as of 1st November By remaining opted into Salary Exchange you are agreeing to a change in your contract to reflect the way contributions will be made. If you are eligible but do not wish to participate, you can choose to opt-out of Salary Exchange. To opt-out go to: co.uk/pensions and complete and return the opt-out form by 19 October 2018, alternatively you can call HRSC to be sent a copy in the post or . By opting-out of the arrangement, you would continue to make contributions to your Plan account in the same way as you do now. For the avoidance of doubt, you can still participate in the Post Office Pension Plan even if you opted-out of Salary Exchange and pay contributions as you do now. Changes to the terms and conditions in your contract: By participating in Salary Exchange, you are accepting a change to your terms and conditions of employment by agreeing to reduce your contractual pay by an amount equal to the pension contribution you would have paid yourself had you not joined Salary Exchange. This is necessary to allow Post Office to make the exchange of your pay, rather than pay the full amount directly to you and into your Pension Plan instead. Salary Exchange does not involve any other alterations to your terms and conditions of employment. As mentioned above, if you do not wish to accept this contractual change and participate in Salary Exchange, you are able to opt out of the arrangement at any time and continue to make contributions as you currently do now. You will be automatically included in Salary Exchange unless you tell us you wish to opt out. By not opting out, you will be treated as having accepted this change to your contractual terms with effect from 1st November

4 Information for those who earn below 1,135 a month There are some situations where using Salary Exchange for your pension contributions would not benefit you. To reduce the risk of members being financially disadvantaged, we have applied a monthly limit called a Pay Protection Limit. This is to protect eligibility to certain state benefits. If our records show that your Pre-Exchange Pay (basic pay) from Post Office is below the Pay Protection Limit, Post Office will not opt you into Salary Exchange, as it may not be in your best interest to take part. We will be writing to colleagues separately who have been identified as being below the Pay Protection Limit. In addition, you will not participate in Salary Exchange if your Post-Exchange Pay were to fall below the National Minimum Wage or National Living Wage. In that case, we would review your pay regularly and include you in Salary Exchange when your pay increases above the minimum levels. If you do not wish to participate in Salary Exchange, please complete an opt-out form and we will ensure you are not included in Salary Exchange when your pay goes above the limits. You also will not participate in Salary Exchange if you receive any Statutory Pay. What you need to do next Please use the resources available to establish if Salary Exchange is going to be right for you. Call HRSC on Go to the pensions website and use the online calculator salaryexchange@postoffice.co.uk Please let us know if you have any questions which are not included in the next few pages. We will regularly update our FAQs through the website. Both CWU and Unite are promoting Salary Exchange and increased pension contributions where applicable. 6 7

5 Frequently asked questions on Salary Exchange, or SE for short 1. Would taking part in SE affect my pay review, bonus payments or my overtime payment? No, future pay reviews and pay-related benefits are based on your Pre-Exchange Pay (basic pay). 2. Is there a catch? Simply put, provided you pay NI contributions and your pay is in excess of the limits stated above, there isn t a catch. However, if your pay is below those limits, it may not be in your interests to participate in SE. SE is a commonplace arrangement for many UK company pension schemes and other Government organisations. Post Office believes SE is a sensible way of making pension contributions in a cost-effective manner, and wants to help employees achieve value from the benefits on offer. 3. Why is it an opt-out scheme? There will be a greater number of members who will achieve an NI saving than not, therefore, an opt-out approach was decided on. That means there are no actions to take if you wish to participate. New joiners, post-november 18, will automatically participate in SE but will have the option to opt-out and pay contributions via net pay if they wish to. 4. Would participation affect my Basic State Pension or State Second Pension at retirement? SE does not impact your Basic State Pension. Since April 2016 you have no longer built up State Second Pension as this has been replaced by one single State Pension. Your entitlement to the new State Pension would not be affected by participating in SE, unless you made a significant contribution which brought your weekly Post- Exchange Pay to less than tax rates and thresholds for any given tax year. 5. If I was to remain opted-in, would it change the amount of income tax I pay? No. Taking part in SE does not affect the overall amount of tax that you pay. If you are a higher rate tax payer, the way you receive tax relief on your contributions is simpler through SE. Currently, pension contributions are made up of two parts: Firstly, colleagues contribute a percentage of pensionable pay, which makes up 80% of the total contribution per month The second part of the contribution is the tax relief for paying into a pension. 20% of the contribution is paid directly to your pension from HMRC If you pay tax at the higher or additional rate, you can then claim further tax relief either through your self-assessment tax return or via an adjustment to your tax code Under SE it is easier to get full tax relief at source as this is already included via your pay each month. As such there would no longer be a requirement for members to claim additional tax relief through their self-assessment tax returns. However, for tax year 2018/19, you will need to claim your higher rate tax relief back from April until October From 1 November, you will no longer need to claim your additional rate tax relief back from HMRC provided you remain opted into Salary Exchange. 6. Why will my pension contributions look higher on my payslip in SE? The Government helps pension members by giving tax relief on pension contributions. This is at the basic rate tax of 20%. For example, currently if your contribution was 100, only 80 would appear on your payslip as the tax relief of 20 is added directly to your pension account. Through SE, the contribution would appear as an employer contribution of 100 and then you would receive the tax relief directly in your pay. You would also make a saving on your National Insurance so your take home pay would be more even though your contributions look more. The same amount goes into your pension, SE does not affect this. A salary exchange arrangement accounts for tax relief automatically collected through your monthly salary and tax calculations, known as PAYE, with pension contributions being deducted prior to the calculation of both income tax and National Insurance. 7. Does SE have an impact on other Post Office benefits? No, as your Pre-Exchange Pay (your basic pay) would be used for the following: Future pay rises and overtime payments Death in Service: Life Assurance Personal official letters e.g. mortgage letters, loan or rental applications or job references Compensation calculations for voluntary redundancy Your holiday pay, calculated on an average of 52 working weeks Any future application for Income Protection 8. Would taking part have any impact on my tax credits? No, SE has no negative impact on tax credits. However, if you take part in any other Salary Exchange arrangement, these should be considered separately. 9. I also take part in other benefits offered through Salary Exchange (e.g. Childcare Vouchers), what does that mean? There are no restrictions to participating in all related Salary Exchange benefits, as long as your Post-Exchange Pay remains above the limits outlined above. If your Post-Exchange Pay fell below these limits in the future, you would be opted-out of each of your Salary Exchange arrangements until you have sufficient Post-Exchange Pay to continue to take part in any remaining arrangements. Once you have sufficient 8 9

6 Post-Exchange Pay, Salary Exchange will be applied automatically, provided you haven t opted-out of Salary Exchange. 10. I am about to go on Family Leave such as Maternity/Paternity/Adoption/ Additional Paternity Leave, what does this mean for me? You will not participate in Salary Exchange if you are receiving any elements of Statutory Pay. The way in which your Family Leave payments would be calculated may alter slightly. However, we would aim to ensure you would be no worse off from participating in Salary Exchange. If you have been with Post Office for less than one year and you are going on Family Leave, please get in touch so we can discuss your options. If you require more information, please contact HRSC. 11. What happens if I were to go on sick leave? You would continue to take part in Salary Exchange whilst on short-term sick leave provided your pay is above the Pay Protection Limit and you are not receiving any Statutory Pay. Please note you would pay contributions as you currently do now for any periods of Statutory Pay. If you are on long-term sick leave, SE will not be applied. Upon returning to work, Salary Exchange will be applied automatically (where your pay is above the limits shown above) and if we haven t received an opt-out form from you. 12. What would happen if I was on unpaid leave? You would not pay contributions during any periods of unpaid leave if you have nil pay. You would return to paying contributions through SE upon your return to work, provided your pay is above the limits set out above and you have not chosen to opt out of Salary Exchange. 13. If my employment with Post Office came to an end, what would happen? If your employment were to finish for any reason, your participation in SE and in all other Post Office benefit plans in which you are participating at that time will also end on your last day of service. If you were to leave the Post Office Pension Plan within the auto enrolment opt-out window, you would be entitled to a refund of contributions. Post Office would provide you with a contribution equivalent to the Salary Exchange adjustment, less tax, NI and any other statutory deductions. 14. What if my circumstances change? A change in your circumstances may be considered a lifestyle event and could mean you review your financial situation. We would recommend you contact HRSC if any of the following scenarios were to happen to make sure SE is right for you: Work related Commencement of or return from sick leave, after three months of leave Commencement of or return from unpaid leave greater than three months A significant change in hours A significant change in base salary Joining/leaving the Post Office Pension Plan Life related Marriage or civil partnership Divorce/legal separation/dissolution of civil partnership Notification of pregnancy/ adoption/additional Paternity or commencement of/return from Maternity/Adoption/Additional Paternity Leave Birth or adoption of a child Moving house Death of partner or dependant Redundancy or involuntary loss of job of partner Reaching State Pension Age Taking or ceasing to have a place with a registered child carer 15. Would my student loan repayments be affected? Student loan repayments may go down slightly if you take part in SE. This is because loan repayments are calculated on your Adjusted Pay which in this case would be your Post-Exchange Pay. 16. Would taking part have any impact on my payments to the Child Maintenance Service (CMS) Payments to the CMS (previously known as the Child Support Agency or CSA) are calculated on your assessable pay. Your assessable pay would change as a result of SE and, therefore, your child maintenance payments could alter as a result. You would need to inform the CMS of the change in your assessable pay. 17. Would Salary Exchange have any impact on other court ordered payments that are taken from my pay? In most circumstances, court orders are based on a percentage of your net earnings and therefore, as a result, SE may have an impact on any attachments awarded. Please contact HRSC for further information. 18. I am over the State Pension age so I don t pay NI. Could I take part? It would be your choice as to whether to remain opted-in to SE. If you are over the State Pension Age and don t pay NI payments, you would not make any savings from taking part in Salary Exchange. 19. Does my actual salary stay the same on my payslip what if I need to prove my earnings for credit purposes? Please refer to Q7. Yes, your payslip would reflect the same basic monthly pay. 20. Will I participate in Salary Exchange if I am receiving Statutory pay? No, you cannot participate in Salary Exchange for any periods of Statutory pay. Whilst you are receiving Statutory Pay (for example, Statutory Maternity Pay), you will pay contributions as you currently do now. 21. Is Salary Exchange and the associated increased pension contributions supported by CWU and Unite? Yes, we have reached a Collective Agreement to introduce this

7 Useful links National Insurance rates and categories saving-into-a-pension/salary-sacrifice CSM information Important note This booklet confers no right to continued membership of any Post Office pension or other benefit programme or to participate in a salary exchange arrangement. Post Office reserves the right to withdraw, suspend or amend any of its pension or other benefit programmes, or the terms of Salary Exchange, at any time. Parts of this booklet summarise expected savings arising from Salary Exchange and the impact of Salary Exchange on certain state benefits. This is based on Post Office s understanding of the current HMRC law and practice and operation of state benefits. However, please note that these can change from time to time. 12