The truth about SMART PENSIONS?

omen666blue

hi everyone!
my company have opted everyone into a smart pension and there is a lot of discussion on it at work. i would like to find out how to calculate how much my company earns out of it as they are not going to put any of their NI savings back into the pension pot. Anyone know the figures?

regards!
c

Battleaxe44

http://www.hmrc.gov.uk/manuals/nimmanual/nim02331.htm

http://www.popeandersonllp.co.uk/publication/16

Haven't been able to find the figures you have requested.

dunstonh

i would like to find out how to calculate how much my company earns out of it as they are not going to put any of their NI savings back into the pension pot.

The company will still be worse off. They certainly wont be profiting out of paying into your pension.

A pension contribution is a business expense. So, it is tax deductible. Using salary sacrifice will save them and you a bit of NI. However, the employer contribution is still a much bigger cost to them.

How much is the company paying? Is it statutory minimum or more?

jamesd

An employer will save 13.8% of the value of the pension contribution. An employee will save 12% on the money up to the upper earnings limit (roughly where higher rate tax starts) or 2% above that.

It typically takes some employer sharing of their NI saving to make this attractive to higher tax rate employees unless the investment options are as good in the work pension scheme as in external ones. If they aren't so good it may pay only to put in the amount that will get employer matching.

omen666blue

Yearly basic pay is
£27500 ish over 13 pay days
plus commission on ticket sales
+£17Ph mandatory sundays of around 8 hours every other weekend
overtime at £14

i figure we are on around £33,000-£34,000 a year
it is a railways pension, and they where not contributing anything out of the NI the saved but now they are doing 20%
they also match our contributions of which are £131.86 Pm @ 13 pay days
im just curious to the rulings
ya see alot of people where told to opt out by the union when it first came in to get contributions Increased by the NI the company saved.
Now its been renegotiated in July this year and everyone who was opted out are now opted back in but have been told by the company that we cannot opt out again till Mar 2014 (mar 2012 what the original start date)

so im unclear 1 hour much would they be making from this?
and secondly the opt out process, do we really have to wait until Mar 2014?


cheers for all the help on this guys!

ermine

omen666blue wrote: »

so im unclear 1 hour much would they be making from this?
and secondly the opt out process, do we really have to wait until Mar 2014?

You're looking through the wrong end of the telescope IMO. The thing to focus on is how much more pension YOU are making from your contributions, assuming you keep the amount you lose from net pay the same. I am having some difficulty understanding why you would rather throw away your saved 12% national insurance on your contributions that would otherwise go down the toilet of Government spending. But maybe the union has said it's your duty to support your fellows at the expense of your own pension?

The opt out/change pension contributions process is made only once a year by HMRC rules - at least that's what my company said. SMART pensions greatly improved my pension AVC contributions by keeping more of my money in my control. I recommend SMART pensions wholeheartedly. My company didn't refund any of the employer NI benefits. Yes it would have been nice but I didn't really give a toss, it was the fact that I kept more of MY hard-earned money that mattered to me.

mania112

I think you're asking if your employer will be paid a fee for using the SMART pension and/or out of your contributions.

Those sorts of fees are usually taken by a Financial Adviser, i don't think:

a) That's possible with this sort of pension
b) Would be applicable to your firm anyway, as this isn't an 'advised' sale.

bigadaj

I sort of see where the OP is coming from, probably because I'm naturally suspicious myself, but as others have noted there's no point cutting your nose off to spite your face.

The company will be saving 13.8% through salary sacrifice, but you would be saving the 12% on your NI contributions so its still definitely worth doing. My company splits the employers saving half and half which is a reasonable compromise, might be worth seeing if your union can renegotiate to a similar split.

dunstonh

Whilst the employer may not be giving some of the NI back to the pension holder, if they are paying more than the statutory minimum, then they could effectively be doing it that way.

redbuzzard

Has the union been telling its members to shoot themselves in the foot? And I don't understand why that would worry the employer at all. As he will just save money if they all opt out.

This reminds me of a conversation with a colleague who wouldn't join the pension scheme (10% employer contribution) because "they take enough off me already, I'm not giving then any more".