Salary Sacrifice Pension Contributions USS and SAUL

What is Salary Sacrifice for Pension Contributions?

• SAUL and USS have introduced changes to their scheme rules to enable institutions to introduce salary exchange for pension contributions • USS have themselves introduced salary exchange for pension contributions from September 2007 for their own staff • 46 HEIs have implemented similar arrangements • The School is intending to introduce Salary Exchange for Pension Contributions for USS and SAUL members from 1 July 2009 SOAS

How it works

• • • • Presently your pension contributions are paid before tax, directly into SAUL or USS. From 1 July 2009, the School is proposing that this will change. Instead of making monthly pension contributions, you agree to give up an amount of your contractual gross pay equal to your pension contributions.

In return, the School increases its contributions to the pension schemes by the same amount.

SOAS

How it works

• • Salary Exchange for Pension Contributions will not affect any other salary-related payments of benefits that you receive from the School, such as salary increases, bonuses and overtime. These will be based on your ‘reference salary’ which is your annual salary before, Salary Exchange for Pension Contributions. Your pensionable salary will be based on your reference salary including any other earnings as recognised by USS or SAUL as pensionable.

Your reference salary will also be the amount used in any personal official letters issued by the School on your behalf e.g. mortgage letters, loan applications or job references etc SOAS

How it works

• • For SAUL members You will no longer pay your 6% pension contributions directly Your contractual gross salary will be reduced by 6% • • For USS members You will no longer pay your 6.35% pension contributions directly Your contractual gross salary will be reduced by 6.35% SOAS

How it works

• • • • In return the School will increase its contributions by an equivalent amount, which will be paid into the pension fund You will pay lower NI, increasing your take home pay Your reference salary for all other benefits purposes is unchanged Your pension benefits are unchanged SOAS

How much will you save?

Example 1 – SAUL Member Grade G6/AC1 Point 29 £30,973 (28,839 + 2134)

Pre-Salary Exchange £ Post-Salary Exchange

Basic Salary 30,973 Pre-exchange Salary Less Pension Contributions 1,858.38 Less Pension Exchange

£

30,973 1,858.38

Less Income Tax Less NIC Net Take Home Pay Post-exchange Salary 4,612.80 Less Income Tax 2,388.36 Less NIC 22,113.46 Net Take Home Pay 29,114.62

4,612.80

2,213.64

22,288.18

The employee’s net take-home pay has increased by £174.72 per annum (£14.56 per month) SOAS

How much will you save?

Example 2 – USS Member G8/AC3 Point 37 £38,666 (36,532 + 2134) Pre- Salary Exchange £ Post-Salary Exchange £ Basic Salary Less Pension Contributions 38,666 Pre-exchange Salary 2,455.29 Less Pension Exchange 38,666 2,455.29

Less Income Tax Less NIC Net Take Home Pay Post-exchange Salary 6,033.60 Less Income Tax 3,111.48 Less NIC 27,065.63 Net Take Home Pay 36,210.71

6,033.60

2,880.72

27,296.39

The employee’s net take-home pay has increased by £230.76 per annum (£19.23 per month) SOAS

How much will you save?

• • • • • The employee and employer save National Insurance at their marginal rate of payment The majority of employees will save at 9.4% on the value of their pension contributions Staff whose earnings are less than £40,040 will save 9.4% on the value of their pension contribution Staff whose earnings are between £40,040 and £43,875 will save 11% on the value of their pension contribution Staff whose earnings are above £43,875 will save 1% on the value of their pension contribution.

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Protecting your pay

• • Members who won’t benefit are protected – If you earn less than £5,715 a year – Those whose pay falls below the National Minimum Wage (NMW) because of participating Your pension deductions will not change – everything stays the same as it was before Salary Exchange for Pension Contributions.

SOAS

Changes to your terms and conditions

• By participating in Salary Exchange for Pension Contributions you are agreeing to a change in your terms and conditions of employment with effect from 1 July 2009 • If you do not wish to participate in Salary Exchange for Pension Contributions, you can opt-out by completing an opt-out form which you can get on request from the Payroll Office. The completed form must be received by 30 June 2009. SOAS

Changes to your terms and conditions

• • If you decide to opt-out of Salary Exchange for Pension Contributions you will have the opportunity to review your decision and elect to participate in Salary Exchange for Pension Contributions with effect from 1 April 2010 and thereafter any subsequent 1 April.

You will be deemed to have accepted the change if you do not complete and return an opt-out form before 30 June 2009.

SOAS

What happens next?

• • The School has agreed to the introduction of Salary Exchange for Pension Contributions and has discussed it with the recognised trade unions From 1 July 2009, all existing pension members in both the USS and SAUL will be automatically enrolled in Salary Exchange for Pension Contributions unless you choose to opt-out, you earn less than £5,715 a year or your earnings fall below the National Minimum Wage SOAS

Questions?