Flexible Benefits

ivorwynard

The company i work for is bringing in a thing called "flexible benefits"
The key points are as follows

1. Stop paying your normal pension contributions
2. Reduce basic salary equal to the pension contribution
3. Company will meet the full cost of pension contributions

So i and the company make less National Insurance contributions

Are there any pitfalls to this scheme for the employee
I will only benefit from about £8 a month
On a reduced salary will it affect my final pension return

Any advice greatfully received
Tim

dunstonh

Sounds like salary sacrifice, which is its proper name. We need a bit more information.

Where is your currrent pension (is it works or personal scheme?)
What do you mean when you say company will meet full cost of pension contributions? (is it a fixed % of income or are they giving you a target income in retirement and paying towards that)

Are there any pitfalls to this scheme for the employee

Yes and no potentially. Depending on where your current pension is, it may have better terms and stopping that could cost you more than the new plan.

On a reduced salary will it affect my final pension return

Depends on the type of pension they are offering and what you currently have.

ivorwynard

Apparently companys which use "flexible benefits" are BT, Tesco, Sainsburys, Astra Zeneca etc
The company i work for has approximately 5000 employees
I have a works pension scheme where i contribute 5.5%.
In the literature given to all employees it states the following

You will stop paying your normal pension contributions to the fund.
We will reduce your basic salary by the ammount equal to the pension contributions you would have paid. This will be 5% or 5.5% if you are paying extra for an increased lump sum in the event of your death in service
The company will meet the full cost of the pension benefits, including the cost previously met by your pension contributions.
As a result of this process you and the Company will make significant savings.This is because you and the company will only pay NI on your reduced salary.As a result you will pay less NI- and the savings that you make will go straight into your take home pay.
I hope this is of use. I have the option as do others of opting out of this scheme and maintaining the status quo.
The company estimate my savings over the course of the year at approximately £94