Smarter Pensions

1 - When will Smarter Pensions start?

Smarter Pensions will appear on your payslip on your first pay cycle after 1 August 2014.

2 - Will Smarter Pensions always be in place?

Smarter Pensions is an arrangement approved by HM Revenue & Customs (HMRC). If for any reason we are no longer able to operate Smarter Pensions, the Company will revert to the current arrangements.

3 - What is the eligibility criteria for Smarter Pensions

You will be eligible to participate in Smarter Pensions if, once your Smarter Pensions contribution has been taken, you earn above the National Minimum Wage (NMW) and in excess of the Primary Earnings Threshold (PET) - this is the rate at which you start paying NI contributions (for 2017/18 tax year £157 per week or £8,164 per annum).

4 - When will Smarter Pensions be applied to my pay?

Smarter Pensions will only be taken in pay periods where your earnings are above the NMW and PET. This means that if your pay tends to fluctuate from one pay period to the next, it could be that you may participate in Smarter Pensions in one pay period but not the next. If you do earn less than the NMW and PET but you do still have Qualifying Earnings for pensions automatic enrolment then you will still participate in NEST but in those pay periods you will have your NEST contributions deducted from your net pay.

5 - Why is my National Insurance reduced but not the income tax I pay?

Pension contributions already attract income tax relief so Smarter Pensions does not affect the overall income tax position.

6 - What happens if I decide to leave NEST?

If you decide to leave NEST within the first month of your membership, you will receive a compensation payment equal to the Smarter Pensions amount(s) taken from your pay. If you decide to leave NEST after the first month of your membership has expired, the total contributions into NEST will remain invested for you.

7 - Will Smarter Pensions reduce entitlement to other company pay and benefits?

Smarter Pensions has been designed to ensure that your entitlements to other company payments such as pay rises, overtime or bonuses and benefits like life assurance or death benefits remain unaffected. Such entitlements will continue to be based on your pay before Smarter Pensions (also known as your reference pay).

8 - What will happen when I’m on maternity, paternity or adoption leave?

Compass will continue to make its normal employer pension contributions and additional employer pension contributions during the period of paid maternity, paternity, additional paternity or adoption leave. A Smarter Pensions adjustment will only be taken when you receive enhanced company maternity/paternity or adoption pay.

Where you only receive Statutory Maternity Pay (SMP), by default, Smarter Pensions arrangements reduce the level of higher-rate SMP that you are entitled to receive in the first six weeks. Compass will therefore ‘top-up’ SMP for the first six weeks to ensure that you receive the same level of higher-rate SMP that you would have been entitled to if you had not taken part in Smarter Pensions.

9 - What about Sick Pay?

If you qualify for Company Sick Pay (CSP), Smarter Pensions will continue as long as you have sufficient earnings.

10 - What if I am at or over State Pensionable Age?

As you will not be paying any NI, Smarter Pensions will not affect your pensionable benefits. However, you will still be included in the Smarter Pensions unless you choose to opt out.

11 - How will Smarter Pensions affect my state pension?

Under current rules, employees will only lose entitlement to Basic State Pension if they earn less than the Lower Earnings Limit (LEL) which is £112 per week for 2015/16. Employees that are at risk of earning less than the LEL in any pay period will not participate in Smarter Pensions in those pay periods.

Additionally, pensioners can receive both a Basic State Pension and the State Second Pension (S2P) on reaching state pension age. S2P entitlement will vary for each individual depending on how much is earned whilst in employment so participation in Smarter Pensions may result in a small reduction in the S2P that you receive when you retire.  Any reduction is expected to be much lower than the amount of money you will save each year via Smarter Pensions and S2P is also planned to cease in April 2016 in favour of a higher single tier Basic State Pension.

12 - How will Smarter Pensions interact with other salary sacrifice arrangements?

Compass allows employees to participate in other salary sacrifice arrangements such as ShareBuy and childcare vouchers. Employees that participate in these arrangements will also be eligible to take part in Smarter Pensions. However, where participation may take your pay below the NMW or PET the following salary sacrifice schemes will apply in the following priority order: childcare vouchers, holiday pay, ShareBuy and then Smarter Pensions. This may mean for instance, that if you were participating in the childcare vouchers salary sacrifice scheme your earnings are at a level which allows you to participate in this scheme but not Smarter Pensions as well, meaning you would make a pension contribution from your earnings instead.

13 - Will Smarter Pensions affect my application for loans, mortgages etc?

Your Reference Pay – this is your gross earnings before the Smarter Pensions adjustment - will continue to be shown on your payslips. If required, Compass will explain Smarter Pension in a separate letter to the lender.

14 - What if I have to pay student loan deductions?

Student loan deductions begin to be made when you receive pay in excess of £17,775 per annum (2017/18). Where you participate in Smarter Pensions your gross earnings will be reduced, meaning any student loan deductions processed through payroll are likely to decrease. This will affect the amount of time it may take to payback your loan.

15 - How will Smarter Pensions affect Attachment of Earnings Orders (AEOs)?

Whether your AEO payments increase will be dependent on your individual circumstances. Any AEOs which are calculated as a percentage of your net earnings may increase under Smarter Pensions.

16 - How will Smarter Pensions affect my current entitlement to Tax Credits?

Smarter Pensions should have no impact on your entitlement to Tax credits.

17 - Do I need to seek independent financial advice?

You may wish to seek independent financial advice on how Smarter Pensions could impact your personal circumstances. You may have to pay for the services of an Independent Financial Advisor so ask for a quote first. The Financial Conduct Authority website provides information in relation to finding a regulated financial adviser at https://www.fac.org/consumers/finding-adviser.

18 - Glossary of terms for Smarter Pensions

Actual gross pay: This is the pay you receive after Smarter Pensions has been applied and before National Insurance and tax have been taken.

Additional employer pension contribution: This is the additional pension contribution made by Compass if you participate in Smarter Pensions. It is equivalent to your Smarter Pensions adjustment which is the employee pension contribution you would have made if you had not chosen to participate in Smarter Pensions.

Full Reference Pay (or just Reference Pay): This is your normal gross pay before the Smarter Pensions adjustment has been administered.

HM Revenue & Customs (HMRC): This is a department of the UK Government that is responsible for the collection of taxes, the payment of some forms of state support, and the administration of other regulatory regimes including the national minimum wage.

Lower Earnings Limit (LEL): The Lower Earnings Limit is the minimum level of earnings which an employee needs to qualify for benefits such as the State Retirement Pension. The LEL is reviewed each tax year.

National Insurance (NI) Contributions: You currently pay NI on your monthly/weekly earnings and pension contributions. You pay NI to build up your entitlement to certain state benefits, including the State Pension.

National Minimum Wage (NMW): The National Minimum Wage is the minimum pay per hour that workers are entitled to by law.

Net pay: This is the pay you take home each month once all reductions and deductions –
e.g. Smarter Pensions, NI, trade union have been made.

Pension Automatic Enrolment: A new law means that every employer must automatically enrol workers into a workplace pension scheme if they: are aged between 22 and State Pension age; earn more than £10,000 a year (2017/18) and work in the UK. This is called ‘automatic enrolment’.

Primary Earnings Threshold (PET): This is the amount set by the Government at which you begin to pay NI contributions at 12%. The PET is reviewed each tax year. Where your earnings are below the PET you will not pay NI.

Qualifying Earnings: As per current Automatic Enrolment regulations, pension contributions will only be made by you/the employer on a band of earnings. For the 2017/18 tax year this relates to earnings between £5,876 a year and £45,000 a year.

Smarter Pensions adjustment: This is the reduction to your pay and is equivalent to the value of the employee pension contributions you would have made had you not participated in Smarter Pensions.

State Second Pension (S2P): S2P is effectively a top-up to the basic state pension, which is intended to help provide additional financial support when you are over state pension age.