You are:

News

Return to news listings

Southeastern SMART Pensions

28 June 2013

Southeastern have written to the trade unions advising of their intention to re-launch their salary sacrifice scheme.

 

What is salary sacrifice?

Salary sacrifice is an arrangement whereby an employee waives entitlement to part of their salary (or bonus), in exchange for his employer paying a pension contribution of an equivalent amount. An advantage of salary sacrifice is that savings in National Insurance contributions (NICs) can be generated. Employee contributions are paid out of salary which is subject to NICs (both employer and employee), whereas employer contributions are not. In the past, salary sacrifice was used almost exclusively by higher earners. However, the concept is now more commonplace through the growth of ‘flexible remuneration’ plans, under which an employee has a ‘flex fund’ which can be used to purchase selected benefits from those on offer, with the remaining money being paid like a normal salary.

Southeastern will deduct the amount of your pension contribution before your salary is then assessed for the deduction of your NICs. The result is that you will pay less National Insurance that will result in an increase in your take home pay. This does not affect your gross salary for pension purposes, redundancy calculations, overtime calculations and assessment of earnings for mortgage applications. Salary sacrifice will also result in significant savings for the company.

TSSA is opposed to the use of Smart pensions/salary sacrifice on grounds that they reduce government revenue for expenditure on vital public services to the benefit of company shareholders. However, in instances where employers introduce such arrangements we have argued that any savings to the employer should be used to improve pension scheme funding levels particularly where the scheme is in deficit. Southeastern intend to make additional payments to the pension scheme depending on the level of employee participation in the salary sacrifice arrangement as follows:

Employees Participating Southeastern’s contribution to the RPS

80% 10%

90% 15%

95% 20%

Obviously additional payments by the company will contribute to the Scheme’s level of funding. However, TSSA is not able to recommend whether or not members participate in the salary sacrifice scheme as this may constitute financial advice that we are not qualified to give

Return to news listings

Join TSSA

 

 

Directory