Who runs a Salary Sacrifice Scheme? Employer or an external company?

emeraldbugle

I wanted to look at this for our members, as we are going to need to increase contributions next year, this may be a good way of enabling the employees to still take home the same money but contribute more.

I was wondering where is the best place to start, do I need to find an employee benefits consultancy, or can we do it ourselves?

Thanks a million :j

dunstonh

If you need advice on settting it up then it falls under the remit of an IFA. You can do it yourselves if you wish.

Remember that from 2012, the NPSS comes in where employers will be forced to make pension contributitions to employees. A salary sacrifice scheme post 2012 "could" actually be detrimental to some employees (as well as the existing potential negatives which some may have issues with).

MikeJones_2

Just our of curiousity, why are you going to need to increase contributions next year? What type of scheme do you have in place?

Mike Jones

I work in the field of Pension Education and Pension Guidance in the UK. I am a current member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

emeraldbugle

Hey Mike,

We need to increase the contributions because of a deficit to a final salary scheme, the employer has already increased their contributions and the employee would do maybe next year. However, I am one of the members and I would much rather keep the same take home pay, but pay more to the scheme!

MikeJones_2

Hi emeraldbugle,

If you're looking at salary sacrifice, keep in mind that because you are in a final salary scheme your pension benefits will depend upon:

- your pensionable salary (which is used as one part of the formula in order to calculate your pension contribution) and

- your final pensionable salary in the years immediately before you take your pension.

If moving to salary sacrifice means a change to either or both of these terms (which will be defined in the Scheme Rules), it may impact upon your pension benefits at retirement for future pension accrual, (as anything you have already built up will be protected).

Different schemes use different definitions for the two terms, so it is the definition of your pensionable salary and final pensionable salary (or ‘final pensionable earnings’) that is important in this type of scheme.

This free factsheet might help as you are in a defined benefit scheme:

What earnings are used in calculating my pension? (Active Members)

(Link corrected now, sorry).

Mike Jones

I work in the field of Pension Education and Pension Guidance in the UK. I am a current member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

emeraldbugle

Mike,

Could you check the link you provided, I couldn't get it to work?

Thanks for the info, I will make sure we don't lose out.

MikeJones_2

Hi emeraldbugle,

Link correct now, sorry for invonvenience.

Mike

emeraldbugle

Do all the active members have to sign up, or can some opt out?

Can you just introduce it for new entrants?

We are contracted out - does this cause any problems?

MikeJones_2

Hi emarldbugle,

emeraldbugle wrote: »

Do all the active members have to sign up, or can some opt out?

At the time of writing, it is up to any individual whether or not to join a registered pension scheme. Even if automatically enrolled into an employer's pension scheme, employees must have the right to opt-out.

emeraldbugle wrote: »

Can you just introduce it for new entrants?

A significant majority of final salary type schemes (which is one type of defined benefit scheme) have closed their doors to new entrants. In these cases, money purchase schemes have been the primary alternative offered to new employees. Employers who close schemes will usually have taken legal advice covering pensions and employment law so as to try to avoid disputes and claims of discrimination.

Pension benefits are classed as 'deferred pay' so great care needs to be taken by employers in these circumstances (i.e. what, if any, implications are there for the same people doing the same job but with different pension arrangements). Not my area of expertise here, so I can't comment - just thought I'd point it out.

emeraldbugle wrote: »

We are contracted out - does this cause any problems?

An IFA, accountant and NI and tax specialist would be the best people to speak with on this question.

Hope this helps.

Mike Jones

I work in the field of Pension Education and Pension Guidance in the UK. I am a current member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.