Smart salary sacrifice and defined benefit pension

jegface

Hi,
I am about to retire and was wondering if it is best to opt out of the Bae systems smart salary sacrifice part of the Defined benefit pension.

Would I be correct in saying  by opting out, my gross would increase which would increase my final salary pension.

Is this correct?

Thank you

MallyGirl

Most employers who operate sal sac have the concept of a notional salary which is unaffected by sal sac. This is used in calculations like death in service multiples and as the basis for percentage bonus calculations.
You need to ask them how yours works.

NoMore

Like Mallygirl says you need to check but also opting out would make you a deferred member and if any actuarial reduction is applied this could be worse than being an active member.  

Marcon

jegface said:

Hi,
I am about to retire and was wondering if it is best to opt out of the Bae systems smart salary sacrifice part of the Defined benefit pension.

Would I be correct in saying  by opting out, my gross would increase which would increase my final salary pension.

Is this correct?

Thank you

Check with the scheme's administrators. That's the only way to be sure.

jegface

Hi Nomore,
I do not want to opt out the defined benefit pension only the salary sacrifice part.
I know I would pay more tax and NI but the end of the year Gross would be higher.

I know if you wanted a mortgage the pensions give you a Reference salary which is your true gross.
Your P60 is less due to the smart pension.

I am hoping the final salary calculation is on the Reference salary not the P60..

MallyGirl

only your scheme will know

Sarahspangles

jegface said:

Hi,
I am about to retire and was wondering if it is best to opt out of the Bae systems smart salary sacrifice part of the Defined benefit pension.

Would I be correct in saying by opting out, my gross would increase which would increase my final salary pension.

I don’t believe this is correct. Your notional salary is what matters for this scheme, and it’s calculated in a different way.

Smart Salary is unusual as it reduces your NI payment (stamp) only, so you actually get more pay. You can’t assume that anything you read online about salary sacrifice, or that friends tell you, is correct for the way that this employer runs their scheme.

https://www.baesystems.com/sites/Satellite?blobcol=urldata&blobkey=id&blobtable=MungoBlobs&blobwhere=1668617446496&ssbinary=true

Marcon

jegface said:

Hi Nomore,
I do not want to opt out the defined benefit pension only the salary sacrifice part.
I know I would pay more tax and NI but the end of the year Gross would be higher.

I know if you wanted a mortgage the pensions give you a Reference salary which is your true gross.
Your P60 is less due to the smart pension.

I am hoping the final salary calculation is on the Reference salary not the P60..

You don't pay more tax (you get tax relief on your personal contributions) - just more NI.

GunJack

The BAE scene works on your reference salary, which will be quoted on your payslip. Not the lower figure on the P60 

Shimrod

jegface said:

Hi Nomore,
I do not want to opt out the defined benefit pension only the salary sacrifice part.
I know I would pay more tax and NI but the end of the year Gross would be higher.

I know if you wanted a mortgage the pensions give you a Reference salary which is your true gross.
Your P60 is less due to the smart pension.

I am hoping the final salary calculation is on the Reference salary not the P60..

You may also find that your 'final salary' is not actually your final salary. it may be an average of the last three years, be capped or have some other deduction applied. You really need to read the pension rules/handbook to find out how it is calculated.

If you are in this section for example, your salary is the average of the last 36 months and may be subject to a cap
https://www.baesystems.com/sites/Satellite?blobcol=urldata&blobkey=id&blobtable=MungoBlobs&blobwhere=1668616827913&ssbinary=true

jegface

I am in the deferred benefit scheme final salary level 200 not the 100+ scheme.
The Notional salary is less than your contractual basic pay.
The pension is calculated on the last 36 months average pay.
The smart booklets tell you how much you save in your wages.
What the booklets don't tell you is which 36 months pay they use  to calculate your pension.
The contractral or the reduced Notional.