LifePlan. The BBC s defined contribution plan - Additional Information Guide Smart Pensions

Transcription

1 LifePlan The BBC s defined contribution plan - Additional Information Guide Smart Pensions

2 Group Life Assurance The Group Life Assurance is designed to provide a lump sum benefit in the event of your death in service. This communication describes the cover provided for employees (fixed term and continuing contracts) who join the BBC after 30 November If you joined the BBC prior to this you should contact the BBC s pension service line for details of the benefits applicable to you. If you die in service, your beneficiaries will receive the following benefits: a lump sum of four times your basic salary plus any London weighting, at the date of your death In addition, if you are a member of LifePlan the BBC s defined contribution plan, your beneficiaries will receive: the value of your fund in LifePlan as a cash sum. Death after leaving BBC service but before drawing your pension Your beneficiaries will receive the value of your fund in LifePlan as a cash sum. If you die during retirement The benefits payable to your dependants will depend upon the type of pension or annuity you selected when you retired and whether you die before or after age 75. Beneficiaries and expression of wish/nomination forms The benefits can be paid to any one or more of your spouse, dependants, relations, your estate or other person, persons or organisation nominated by you. In respect of the Group Life Assurance, you will need to complete an expression of wish form to nominate a beneficiary to receive your multiple of salary lump sum, if you die in service. You can contact the BBC pension service line on for an expression of wish form or download one from the Life Assurance page on Gateway. In respect of LifePlan, you will need to complete a nomination form to nominate a beneficiary to receive the value of your fund, if you die prior to 1

3 taking retirement benefits. You should contact Aviva or you can log into your My Money account to nominate a beneficiary. Tax implications You will not normally be required to pay income tax on the amount the BBC pays to provide the Group Life Assurance. The death benefit lump sum will normally avoid Inheritance Tax, because the Trustee has discretion about who should receive the benefit on your death, guided by the Group Life Assurance s governing legal documents. The discretionary nature of this payment means that the lump sum payment will normally stay outside of your estate, going direct to your nominated beneficiaries. This is one reason why it is important for you to complete the expression of wish form. If the value of your lump sum plus the value of your LifePlan and any other pension account/s provided to your beneficiaries exceeds the Lifetime Allowance ( 1.03 million 2018/19) then any excess over this amount may be subject to charges. What happens if I am absent from work due to illness, injury, unpaid absence or travelling abroad on business? You will continue to be covered for death in service benefits when you are on paid absence through sickness or on holiday or travelling abroad on business. Death in service benefits during a period of unpaid absence will continue with prior agreement of the BBC. What happens during periods of family leave (statutory maternity / paternity / parental or adoption leave)? You will continue to be covered for death in service based on your basic salary plus any London weighting prior to commencement of your leave. Note This communication represents a brief overview of the Group Life Assurance. Full details of the terms and conditions are available from the BBC Pension service line on Please note that the contents of this communication are for information purposes only. 2

4 Smart Pensions Contributions through Smart Pensions As a member of LifePlan the BBC s defined contribution plan, will be met through a salary sacrifice arrangement. This is called Smart Pensions. Your basic salary will be reduced by the amount you have chosen to be contributed to LifePlan and as a result you pay less National Insurance. How does it work? You do not pay into LifePlan Instead, your basic salary (contractual pay) is reduced by an amount equivalent to the gross amount you choose to be paid into LifePlan The BBC will pay to LifePlan a contribution equal to the amount you have sacrificed through Smart Pensions, plus the BBC will make a further contribution on your behalf (see page 5) Because your basic salary is lower, you pay lower National Insurance so your take home pay increases You will retain a base salary (for example your basic salary before adjustment for Smart Pensions) as a reference point for increases with pay reviews. Under Smart Pensions you agree to a contactual change to your terms and conditions of employment which results in a reduction to your salary. As a result, you pay less NI and your tax position is the same as if your had paid pension. The following example shows how Smart Pensions works and assumes a salary of 30,000 a year and a contribution to LifePlan of 6%. 3

5 Example Payments Without Smart Pensions With Smart Pensions Basic pay 30,000 28,200 Employee pension Tax relief added by Aviva (20%) Total contribution to LifePlan Pay after pension 1,440 (from net pay) 360 1,800 1,800 28,560 28,200 0 ( 1,800 contribution paid by BBC) 0 (tax relief is now provided through payroll) NI 2,589 (based on basic salary of 30,000) 2,373 (based on basic salary of 28,200) Pay after pension contribution and NI 25,971 26,187 In this example a member saves 216 a year in NI through Smart pensions. This example is based on National Insurance/tax rates for 2018/19. The NI saving will vary according to an individual s salary. You choose the contribution rate that suits you and you can increase or decrease or stop to LifePlan at any time subject to certain limits. Your salary cannot be reduced to a level lower than the National Minimum Wage. If you elect a higher contribution rate we will tell you if you are affected and restrict the reduction to your salary so that your salary remains above the National Minimum Wage. There may be some LifePlan members (i.e. those on low pay or receiving State benefits) for whom Smart Pensions may be disadvantageous. If you are one of them, you will be excluded automatically and alternative arrangements will be made to collect. 4

6 Employer In addition to whatever you pay under Smart Pensions, the BBC and other associated employers will make a contribution of your base salary (see table below). Your Smart BBC 4% * 4% 8% 5% 5% 10% 6% 7% 13% 7% 8% 15% 8% 10% 18% 8% or more 10% maximum Total LifePlan 10% BBC plus your smart * From 1 April 2019 the minimum contribution is proposed to increase to 5% For example, if someone with a basic salary of 30,000 decided to exchange 6% ( 1,800) of their salary for pension contribution, the BBC would add a further 7% ( 2,100). This makes a total annual pension contribution of 3,900. To join LifePlan you will need to exchange a percentage of your base salary for pension made by the BBC. The BBC will also make a contribution (see table above). Are my BBC benefits affected? Although Smart Pensions represents a contractual change to your salary, it will not reduce the benefits that you receive from LifePlan. Your base salary (your basic salary before adjustment for Smart Pensions) is the amount used to calculate the to LifePlan. Your base salary is also used to work out BBC salary-related benefits (for example, salary increases, overtime and group life assurance). It is also the amount used in mortgage letters. This means that Smart Pensions has no effect on future pay reviews or other benefits you receive from working at the BBC. 5

7 Are my State benefits affected? Smart Pensions will not normally reduce these tax credits: Child tax credit Working tax credit (See further information section for details of the Tax Credit helpline that can provide further information) Smart Pensions may affect the following State benefits: Statutory Maternity Pay (SMP) Statutory Adoption Pay (SAP) Statutory Sick Pay (SSP) Statutory Paternity Pay (SPP) If you receive these benefits you will not be included in Smart Pensions. You will remain out of Smart Pensions until the first pay date after you stop receiving these benefits. Your basic salary will then be tested against the criteria for State benefits. If your salary is sufficient and State benefits are not affected, you will be automatically included in Smart Pensions. If your earnings are less than 6,000 a year the following State benefits could be affected: Basic State pension Incapacity benefit Jobseekers allowance For this reason, anyone earning less than 6,000 a year will not be included in Smart Pensions as well as anyone not meeting National Minimum Wage checks. 6

8 Will Smart pensions affect my State pension? The Government introduced a flat rate State pension for those reaching their State pension age on or after 6 April To receive any State pension you will need to have paid National Insurance for a minimum of 10 years. While you are a member of LifePlan you pay the full rate of National Insurance so your new State pension is unaffected. If you have previously been a member of a contracted out pension arrangement then this may affect the amount of State pension you will receive. What happens if I go on Maternity Leave? LifePlan members who go on family leave (maternity) and receive statutory maternity pay, will automatically be taken out of Smart Pensions and contribute to LifePlan via traditional (not Smart Pensions) on their statutory maternity pay. LifePlan members will automatically be opted back in once returned to work and receiving full pay. Further information: Tax Credit Helpline For more information about whether Smart Pensions would affect any of your tax credits call State Pension Advice Helpline For more information visit thepensionservice.gov.uk or call The Pension Service on Independent financial advice For details of an independent financial adviser where you live visit unbiased.co.uk. Produced by BBC Pension and Benefits Centre November