Salary Sacrifice Car Scheme

Transcription

1 Salary Sacrifice Car Scheme

2 ABOUT THE SCHEME SALARY SACRIFICE PROVIDES THE OPPORTUNITY FOR ALL ELIGIBLE EMPLOYEES TO HAVE ACCESS TO A BRAND NEW VEHICLE Salary sacrifice allows you to pay for a car by reducing the amount you earn before tax and national insurance is applied. The main benefit is that you will save Income Tax, National Insurance and Pension Contributions on the amount you sacrifice. To qualify you must be a permanent employee and be paid above the national minimum wage after your salary has been reduced. Your choice of car must be suitable and affordable. Free choice of car Hassle free motoring WHAT VEHICLE CAN I CHOOSE? You can choose any car that is available in the UK with your employers approval. The Public Sector gets some of the largest discounts available and we choose the best price from 8 leasing companies to ensure that you get the best deal. Low CO₂ & low list price = Greatest savings

3 HOW DO I GET QUOTES ON-LINE WHAT IS INCLUDED IN THE CONTRACT You can use our online service or contact our office for assistance. Signing up to our website is quick and simple. You will have a personal welcome page where you can request new quotes and view all previous requests. We need to know your salary and tax code to calculate accurate savings. Your quotes will normally be available to view in your online account within 24 hours of your request. HOW DO I PROCEED WITH A CAR If you are happy with the quote, complete your application online and follow the progress of the car from order through to delivery. PROGRESS OF MY ORDER We will automatically inform you weekly of progress or changes to the estimated delivery date. It will not be necessary for you to contact us. IS THERE A LIMIT TO HOW MANY QUOTES I CAN HAVE There is no limit to the number of quotes that you can request. However, we have a limit of five cars per session to enable us to turn round the quotes quickly. You will be provided with a new car including insurance, maintenance and servicing. It also includes road fund licence, accident management, and breakdown and recovery services. All replacement parts such as tyres, batteries and exhausts are included in the contract (subject to being a result of fair wear and tear ). You will also have the full support of Knowles Associates if you have a problem during the life of the contract. CONTRACT TERM The standard term is 36 months, but other periods can be arranged. CONTRACTED MILEAGE The annual mileage will be agreed before the car is ordered. You must submit a mileage claim each month for your business mileage travelled. An excess mileage charge will apply if the contracted mileage is exceeded. WHO IS INSURED TO DRIVE THE CAR The car is insured for you and your partner. Additional drivers may be added at an increased cost. WILL I NEED TO PAY A DEPOSIT We suggest you initially request quotes for the basic model of different vehicles without too many extras for comparative purposes. Once you have decided which car you would like, you can then enhance the specification and add extras. If you need advice, please contact our dedicated team on There is no deposit and no credit checks. EARLY TERMINATION If you leave the scheme early a termination charge may apply. The charge will depend the car and when it is returned. An indication of the early termination charge is provided on the quote. Sign up at or call

4 END OF CONTRACT ARRANGEMENTS At the end of the contract you can: Replace your car with a brand new one Purchase it Return the car You will be required to return the car in a clean and tidy condition. If the car is returned with previously un-notified damage beyond normal fair wear and tear you may be responsible for any additional charges. A fair wear and tear guide is available on our website. HOW WILL THE SCHEME AFFECT ME It is crucial to understand what a sacrifice will mean in practical terms before entering any arrangement. You should consider the effect that a reduction in pay may have. NATIONAL MINIMUM WAGE The minimum wage is a key factor when considering salary sacrifice. This is because current legislation does not allow you to be paid below this amount. If you have a salary sacrifice arrangement that takes you below this limit you may have to give up the item you sacrificed. STATE PENSION, BENEFITS AND TAX CREDITS Salary Sacrifice could have an effect on your entitlement to state benefits and tax credits and so should be carefully considered before you decide to proceed. When you sacrifice cash pay in return for a car, you will not pay National Insurance Contributions (NICs) on the value of the pay you sacrificed. Although this means you will save NICs it also cuts the earning on which you pay NICs and may take your earnings for which NICs are due below the Lower Earnings Limit (LEL) ( 109 per week in ). Entitlement to some benefits is based on the amount of NICs you pay and others on the amount of your earnings. Entering into a salary sacrifice arrangement could affect current or future entitlement to a range of benefits. For most, paying less NICs may not adversely affect your benefit entitlement because you may still be paying enough NICs to qualify for benefits, you may be deemed to still be paying enough NICs or if you only sacrifice for a short time your contribution history will only be affected for that period therefore the effect on your benefit entitlement would be minimal. Your State Second Pension may also be affected if your earnings fall below the LEL as a result of salary sacrifice. Salary Sacrifice may also affect your entitlement to the following: Statutory Sick Pay (SSP) Statutory Maternity Pay (SMP) Ordinary Statutory Paternity Pay (OSPP) Additional Statutory Paternity Pay (ASPP) Statutory Adoption Pay (SAP) State Pension Any means-tested benefits SALARY SACRIFICE AND CONTRIBUTION- BASED BENEFITS Entitlement to contribution-based benefits is related to the amount of NICs you pay. Reducing your pay by way of Salary Sacrifice may reduce the amount of earnings that you pay NICs on to below the LEL so that you are no longer paying NICs. Even if your earnings remain above the LEL, the reduction in the amount of NICs you pay could reduce your entitlement to contribution-based benefits.

5 Contribution-based benefits include: SALARY SACRIFICE AND WORK-RELATED PAYMENTS INCAPACITY BENEFIT If your deductible earnings fall below the LEL, you may not be entitled to Incapacity Benefit, If this happens, you may be entitled to Income Support based on Incapacity which is a means tested benefit. SALARY SACRIFICE AND EARNINGS-RELATED BENEFITS Entitlement to earnings-related benefits is based on your level of earnings, not including any amount sacrificed. Earnings-related benefits include: MATERNITY ALLOWANCE If your cash earnings fall below 30 per week you will lose your entitlement to Maternity Allowance (MA). If your cash earnings fall between 30 and 125 per week you will still be entitled to MA but at a variable rate. If your earnings are 125 a week or more you will receive the full standard amount of MA. Work-related payments paid by your employer are based on your average earnings over a fixed period of time before you begin receiving them. The amount sacrificed is not included as part of your average earnings for calculating these payments, so the amount you receive could be reduced as a result of the sacrifice. Work-related payments include: MATERNITY PAY The Statutory Maternity Pay (SMP) and/or Occupational Maternity Pay (OMP) that you are entitled to is calculated based on your earnings during the eight week period leading up to the 15 th week before the baby s due date. If you are sacrificing salary during this period the SMP/OMP will be calculated on the lower amount. To ensure that your SMP/OMP is not reduced, you can decide to either; stop the salary sacrifice and return the vehicle before the SMP calculation period, or retain the vehicle but transfer the salary sacrifice to a salary deduction arrangement again before the SMP calculation period. THE STATE SECOND PENSION The State Second Pension forms part of the State Pension. Salary Sacrifice can affect the State Second Pension as the value is calculated based on your annual pay after sacrifice. If you are pregnant or expect to have a period of maternity leave you should carefully consider whether to join the scheme. STATUTORY SICK PAY/LONG TERM SICKNESS If your average weekly earnings fall below the LEL you will lose your right to Statutory Sick Pay (SSP). If this happens you may still be entitled to Income Support or Incapacity Benefit. You can stay in the scheme during periods of sickness provided that your sick pay, after salary sacrifice, does not fall below the national minimum wage. It is not advisable to enter the scheme if you know or suspect that you may need to take extended periods of leave, i.e. surgery. If long term sickness develops during the period of the sacrifice, this can be treated as a life style change and the car could be retained under a salary deduction arrangement.

6 SALARY SACRIFICE AND TAX CREDITS FURTHER CONSIDERATIONS Working Tax Credit and Child Tax Credits may be affected by Salary Sacrifice. Each situation is unique therefore if applicable you should seek advice from your local tax office. SALARY SACRIFICE AND INCOME-RELATED BENEFITS If you are receiving Housing Benefit and/or Council Tax Benefit you should contact your Local Authority to determine if Salary Sacrifice will affect the payments. PAYMENTS ABOVE BASIC SALARY You have a responsibility to advise your employer if you receive any penalty points on your driving licence or become disqualified from driving. If you return the car due to disqualification you will be liable for the early termination penalty. Payments over and above the basic salary, that are based on an hourly rate, such as overtime, call out etc. will not be affected by the sacrifice. LIFE STYLE CHANGES EARLY RETIREMENT In the event of an early pension due to redundancy etc. the pension may be based on the lower salary (after the sacrifice is applied), for further information contact your payroll department. REDUNDANCY PAYMENTS Redundancy pay may be affected by salary sacrifice, for further information contact your payroll department. MORTGAGE AND CREDIT APPLICATIONS A reduction in taxable salary might also affect more general financial matters such as mortgage and credit applications. However, the majority of lenders take into account the salary sacrifice arrangement when making decisions. HMRC accepts that there may be unforeseen life events that will affect your ability to continue a sacrifice arrangement. Where your income falls below the minimum wage, you can keep the car under a salary deduction scheme. We will arrange for your contribution to be deducted from salary rather than sacrificed. This may increase your costs because you will not have any savings but it will allow you to keep the car for the remainder of the contract. CAR BENEFIT TAX A salary sacrifice car is a company car; cars provided under this type of arrangement will attract car benefit tax and will affect your tax code. An estimate of your tax liability will be provided on each quote you receive.

7 HOW WILL NHS PENSION BE AFFECTED? 1995 NHS PENSION SCHEME CURRENT ARRANGEMENTS If you are a member of the 1995 NHS Pension Scheme your pension benefits are based on your best year of the last 3 years prior to retirement. This means that should you have the reduced salary in force when you come to retire or receive benefits, these benefits will be affected. You need to decide if this could apply to you. Nearer your chosen retirement date you may consider leaving the salary sacrifice scheme NHS PENSION SCHEME CURRENT ARRANGEMENTS If you are a member of the 2008 NHS Pension Scheme your pension benefits are based on an average of the best three consecutive years in the last 10. WHAT IMPACT WILL THIS HAVE ON MY PENSION UNDER THE PROPOSED PENSION SCHEME BEING INTRODUCED IN 2015? The new NHS Pension Scheme will be introduced from April 2015 It is a career average scheme rather than a final salary scheme You accrue pensionable earnings for every year you participate in the NHS Pension Scheme Your pension will accumulate in 1/54ths of your pensionable earnings. Further information on the New NHS Pension Scheme can be found on NHS Employers Website. Please note this booklet is a guide only and provides information about the scheme. It is not the terms and conditions of the scheme or the scheme rule book. Employees should always seek independent advice if unsure about the suitability of the scheme to them.

8 EMPLOYEE BENEFITS: Opportunity of leasing a brand new car No deposit or credit check Significant cost savings over providing a private car Access to public sector discounts Flexible periods of hire Option to purchase at the end of the contract ALL VEHICLES INCLUDE: Fully Comprehensive Insurance Mechanical and electrical repairs Routine Servicing Replacement tyres, exhaust, glass, excise duty Breakdown and Recovery Service Accident Management Courtesy car - Accident Repairs Knowles Associates Total Fleet Management Red Lion House The Green Great Bentley Colchester Essex CO7 8QG Tel: Fax: quotes@knowlesfleet.com