Tesco Retirement Savings Plan

tigerspill

Does anyone know if the above DC pension scheme can be contributed to by salary sacrifice.
I gave googled and can't seem to find the answer to this.
Thanks for any help on this.

Marcon

tigerspill said:

Does anyone know if the above DC pension scheme can be contributed to by salary sacrifice.
I gave googled and can't seem to find the answer to this.
Thanks for any help on this.

No. See https://www.usdaw.org.uk/CMSPages/GetFile.aspx?guid=07138294-35db-475e-bf69-d86f242f2ffa#:~:text=What%20is%20the%20Tesco%20Retirement,sent%20to%20the%20plan%20provider.

This could be why: https://employeebenefits.co.uk/issues/march-online-2017-2/tesco-reimburse-underpaid-employees-9-7m/

Marcon

[Deleted User] said:

Another view is that yes, you can: https://www.legalandgeneral.com/workplace/t/tesco/how-much-does-it-cost/pay/saving-through-smart-for-those-who-pay-tax/

Sounds like one where OP definitely needs to ask the employer!

geordiejon

worked at tesco more years than i care to remember.
the smart pension scheme is set between 4% and 7.5% and also after contributions your pay can not drop below the minimum hourly rate, if it does you are automatically taken out of the scheme for that month only(just say you were on sick pay). if you a month later were earning normally you would go back into it.

you can opt out of smart and contribute whatever you like, you need to see h/r and speak to them about it and they will have all the info you need.

Nimb

I also work for Tesco and wanted to add to my pension and below is my experience.

An employee can increase their personal contributions above the 7.5% but the company will not go above the 7.5%. 

As stated above in reading your contributions  could lead to you being removed from SMART.

A while back I did look at the L&G/ Tesco pension website and it did state that you could make lump sum payments but there was no info on how this was treated in respect to tax clawback - also the extra payment could not be done online (cheque) only).

In the end I did a lot of research on this (excellent) forum and decided that starting a SIPP was the best way forward for myself.”

tigerspill

Thank you for all the replies.  For clarification, this is not my own pension, but I am looking at this for my sister so I don't have ready access to all the details.
I have another dumb question having confirmed that Tesco do operate a SMART Pension.  Salary Sacrifice pension payments (Smart Pensions), as I understand them, in the main, are designed to make more efficient use of the payments made in that they are in essence taken from gross pay and therefore benefit of the savings on both income tax and national insurance.
The Tesco documentation says the following two statements, that to me seem contradictory.



The first statement says that the amount going into the plan does not change if coming out of SMART.
The second section suggests that because the payment comes form gross pay, that you do benefit from the NI saving.
I am obviously misunderstanding something here.  

Dazed_and_C0nfused

Salary sacrifice is where you agree to a reduced salary in return for additional employer contributions, the employee no longer contributes.

There is no pension tax relief due on employer contributions so £100 sacrificed will end up as £100 in the pension fund.

But as £100 of salary has effectively been given up no income tax or NI is paid on that £100.  Which for a typical basic rate taxpayer will save £20 in tax and £12 in NI.

If the employee paid £100 via RAS (relief at source) then the pension company would add £25 in basic rate tax relief giving a pension fund of £125.

Other than for very low earners salary sacrifice is generally the most tax (and NI efficient) method of getting money into a pension.  And the simplest as you never need to involve HMRC.

Bimbly

Say you pay £100 per month into the Tesco pension.

Under SMART, your pay will be reduced by £100 and this £100 will go into the pension (plus the employer contribution). 

If you don't pay through SMART, you pay £80 from your salary and L&G add the £20 tax relief, making a total of £100 (plus employer contribution). 

In the first example, £100 has come out of your salary to make this contribution. In the second example, £117.5 has come out of your salary to make the same £100 contribution, because you need to get paid £117.5 to receive a salary of £80 after 20% income tax and 12% national insurance has been taken out.

If my maths are right (you get the idea, regardless).

tigerspill

Dazed_and_C0nfused said:

Salary sacrifice is where you agree to a reduced salary in return for additional employer contributions, the employee no longer contributes.

There is no pension tax relief due on employer contributions so £100 sacrificed will end up as £100 in the pension fund.

But as £100 of salary has effectively been given up no income tax or NI is paid on that £100.  Which for a typical basic rate taxpayer will save £20 in tax and £12 in NI.

If the employee paid £100 via RAS (relief at source) then the pension company would add £25 in basic rate tax relief giving a pension fund of £125.

Other than for very low earners salary sacrifice is generally the most tax (and NI efficient) method of getting money into a pension.  And the simplest as you never need to involve HMRC.

Thank you for this.  So in essence, both the statements on the Tesco documentation I posted are correct.  The amount going into the plan remains unchanged.  However, because of the mechanism use to make the payment is different, this results in a lower "cost" in real terms to the employee using salary sacrifice than not.  So just to try and ensure I have this right can I try and show the two examples as I try to clarify.

1. Salary sacrifice - Employee gives up £100 of gross pay to have £100 added to their smart pension.  Normally this would be made up of £75.76 net + £15.15 tax + £9.09 NI.  Total real cost for £100 pension = £75.76.

2. Non Salary sacrifice - To get the same £100 into pension, employee contributes £80 from net pay and the tax of £20 is added back on giving the £100 (not totally sure of the actual mechanism here).  Total real cost for £100 pension = £80.00

Am I close?

AlanP_2

tigerspill said:

Dazed_and_C0nfused said:

Salary sacrifice is where you agree to a reduced salary in return for additional employer contributions, the employee no longer contributes.

There is no pension tax relief due on employer contributions so £100 sacrificed will end up as £100 in the pension fund.

But as £100 of salary has effectively been given up no income tax or NI is paid on that £100.  Which for a typical basic rate taxpayer will save £20 in tax and £12 in NI.

If the employee paid £100 via RAS (relief at source) then the pension company would add £25 in basic rate tax relief giving a pension fund of £125.

Other than for very low earners salary sacrifice is generally the most tax (and NI efficient) method of getting money into a pension.  And the simplest as you never need to involve HMRC.

2. Non Salary sacrifice - To get the same £100 into pension, employee contributes £80 from net pay and the tax of £20 is added back on giving the £100 (not totally sure of the actual mechanism here).  Total real cost for £100 pension = £80.00

Am I close?

The mechanism is in use for SIPPS etc. across the board, L&G claim 25% of the net contribution amount from HMRC, so on £80 they would claim £20 on your behalf making a £100 gross contribution.

This may be credited to the pension account at the same time as the £80 contribution or may be a few weeks later when L&G receive the £20 from HMRC.