Pension Salary Exchange - SGRS

Sanctuary Group (“Sanctuary”) provides a pension scheme called the Sanctuary Group Retirement Saver (“SGRS”). This works by members contributing to their pension from their net pay (post-tax take home pay), (known as a ‘net deduction’). Sanctuary then matches pension contributions up to 7%.

Pension Salary Exchange is a more efficient way to contribute towards a pension.  If you are a member of the SGRS, Pension Salary Exchange works in the following way:

• You are currently making pension contributions on a percentage basis. This percentage contribution is applied on all ‘Pensionable Salary’, which is your Total Pay i.e., your basic rate and policy allowances and not bonuses, overtime payments etc. 
• Under Salary Exchange, your Total Pay, now known as ‘Reference Pay’ is reduced by the employee pension contributions that you currently make plus the basic rate tax relief that SGRS claims on your behalf. The resulting salary will then be known as your ‘Adjusted Salary’. If you are a member of the SGRS the employee contribution % (including tax relief) you are currently making and sanctuary’s matching contribution % are included in your Salary Exchange letter.  
• Sanctuary then pays an employer pension contribution to your SGRS, equivalent to the reduction in your Reference Salary, in addition to the matching employer contribution we were already making.   Your payslip will show SE SGRS under ‘Payments’.  The amount will be a negative value for your employee contribution amount, reflecting the amount of salary exchanged.
• Any mortgage requests, loans or debt plans etc. will be based on your Reference Pay and will therefore not be impacted by Pension Salary Exchange. In addition, pay rise calculations and all other benefits provided by Sanctuary (including life assurance) will be based on your Reference Pay and will therefore be unaffected by the Pension Salary Exchange arrangement.

Two key things to remember about Pension Salary Exchange are:

• By structuring employee contributions in this way, both you and Sanctuary save National Insurance Contributions (NIC). As a result, your net pay should increase when compared to making pension contributions from your net pay as you do now.
• If you are a higher or additional rate taxpayer, you will receive full tax relief on pension contributions immediately, through the monthly payroll. As a result you will not have to claim any higher/additional rate tax relief from HMRC (which is necessary when making pension contributions from net pay).

As most participants are expected to be better off through Pension Salary Exchange, you will be automatically entered in the SGRS Salary Exchange scheme if you meet the eligibility criteria. Therefore, you do not need to take any further action to participate. All new starters eligible for SGRS will also be automatically enrolled into Pension Salary Exchange if they are eligible. It is important to understand that your terms and conditions of employment will be changed to reflect this if you do not withdraw out of the Pension Salary Exchange scheme (see below).

No, participation in the Pension Salary Exchange is purely voluntary. If you decide that you do not wish to take part in the Pension Salary Exchange scheme, you can make (or continue to make) your own personal contributions from your net pay into your pension with the SGRS

If you do not wish to participate in the Pension Salary Exchange, you can request to withdraw from the scheme. Please see the ‘What if I do not wish to participate?’ FAQ for details of the Withdraw process.

We have previously covered the circumstances where participation may not be advantageous to you or where there are additional considerations for you to take into account. However, overall, it will be advantageous to many employees.

Pension Salary Exchange will continue to run indefinitely, unless it becomes no longer beneficial for employees or Sanctuary, in which case Sanctuary reserves the right to vary or cease the Salary Exchange scheme and instead take your employee pension contributions from your net pay as happens now.

At Sanctuary, a number of payroll cycles are operated. You will be automatically entered into Pension Salary Exchange, at your current level of SGRS pension contributions, on the relevant date for your payroll cycle. The payroll cycles are listed below, along with the associated dates that employees will automatically enter Pension Salary Exchange.

We have provided two detailed examples in the Appendix showing the position with and without Pension Salary Exchange.

Please note: Full income tax relief is effectively provided via the payroll for Pension Salary Exchange rather than via self-assessment / tax coding adjustments for non-Salary Exchange Pensions contributions.

Please also note: NIC savings are proportionately less for higher earners because the rate at which NIC is paid reduces from 12% to 2% for earnings over the NIC Upper Earnings Limit (£50,270 per annum for the 2023/24 tax year).

Sanctuary Group savings

In addition to savings to you, Sanctuary will also benefit from NIC savings which will be re-invested into the Group to support the services it provides to all our customers.

Your pension contributions and other Sanctuary provided benefits will not be affected by your participation in Pension Salary Exchange nor will there be any impact on future pay reviews, overtime rates, bonus arrangements, etc. There may, however, be an impact on statutory payments. Please see below.

Pensionable Pay will be used as the basis for calculating pension contributions. Pensionable Pay is your base pay rate only, i.e your Total Pay (now your Reference Pay), and does not include bonuses, overtime payments, other allowances etc.

It is your current Total Pay (‘Reference Pay’) which will typically be used for any loan or mortgage references you require. Salary Exchange schemes should not therefore affect any such requests, and will not adversely impact on your ability to qualify for a mortgage or any other loan. However mortgage lenders may require greater details regarding your finances, which may include details of Salary Exchange schemes that you are participating in.

If you meet the following eligibility criteria, you will automatically be entered into Pension Salary Exchange:

• Member of the Sanctuary Group Retirement Saver (“SGRS”) or The People’s Pension (“TPP”) pension scheme. You have been identified as currently paying into the SGRS pension scheme.  
•  Employed on contracted hours, i.e., not on a bank contract. 
•  Are paid an hourly rate above the National Minimum Wage (“NMW”) Compliance Threshold.  It is imperative that we ensure you receive the appropriate National Minimum Wage for all time worked. As Pension Salary Exchange requires you to exchange some of your total pay, this has the effect of reducing your total pay when we assess if NMW has been paid.  To protect your pay levels, we are not allowing individuals to join Pension Salary Exchange if their total pay is below a compliance threshold of 15% above the adult NMW rate. The current threshold is set at £11.98 per hour and will be revised when there is a change to NMW rates.  Therefore, you may be excluded from participating in the arrangement to ensure your right to be paid NMW has been met.   
•  Have an annual total pay above the Lower Earnings Limit for NIC purposes (£6,396 in the 2023/24 tax year).  

Should you not currently be making contributions to SGRS (e. g. you have opted out of the pension), should you choose to join the pension and are eligible to do so you will be automatically entered into Pension Salary Exchange if you meet the criteria, unless you complete the Salary Exchange Withdraw form. Please note, every three years Sanctuary is required to re-enrol all employees not currently contributing into a pension scheme.

If you do not wish to take part in Pension Salary Exchange then you will need to complete the Pension Salary Exchange Withdraw form by 23 October 2023. To access this, visit www.sanctuary.co.uk/pse-withdraw-form or scan the below QR code.  You will need to include your Employee ID on the form which you can find on your payslip.

Please be aware if you want financial, investment or tax advice you should consult a financial advisor. Please note that Sanctuary cannot give financial advice. If you would like financial advice on this matter, you can find an independent financial adviser in your area via www.unbiased.co.uk

As Pension Salary Exchange is beneficial for many employees, if you meet the criteria you will automatically join the scheme unless you withdraw. Please note that if you do not complete the Pension Salary Exchange Withdraw form by 23 October 2023, you will be automatically enrolled into the scheme on the relevant date for your payroll cycle - please see the ‘When will I see a change?’ FAQ.

Once you are participating in Pension Salary Exchange, you can withdraw at any time, however, re-enrolment into Pension Salary Exchange will be quarterly.

If you leave SGRS entirely at a later date but remain employed by Sanctuary, contributions will no longer be made to your pension fund and so you will not be part of Pension Salary Exchange. You will be paid your Reference Pay instead of your Adjusted Pay. Any contributions made into the Pension Scheme will not be refunded. Sanctuary is obligated to re-enrol you into a pension scheme every three years.

National Minimum Wage (NMW) It is imperative that we ensure you receive the appropriate National Minimum Wage for all time worked. As Pension Salary Exchange requires you to exchange some of your salary, this has the effect of reducing your pay when we assess if NMW has been paid to you. To protect your pay levels, we are not allowing individuals to participate in Pension Salary Exchange should their pay fall close to the relevant NMW limit. Therefore you may be excluded from participating in the scheme in order to ensure your right to being paid NMW has been met. Eligibility will be reviewed on a quarterly basis.  If your circumstances change and you become eligible for Pension Salary Exchange, you will be notified to advise that you will be automatically included unless you choose to complete the Withdraw Form.

The following Groups are also excluded from Pension Salary Exchange

Lower Earnings Limit for NIC (LEL) Similar to the above, Sanctuary wishes to ensure that no employees’ salary after Pension Salary Exchange falls below the Lower Earnings Limit for NIC purposes (£6,396 in the 2023/24 tax year), as this may affect entitlement to certain state benefits (including, but not limited to, incapacity benefit, bereavement parent allowance and State Pension). These checks have been undertaken as part of our NMW checks above. Employees whose earnings may be taken to below this threshold will not be able to participate. Again this will be continually monitored and should your earnings return to a level above this limit, you will be notified individually.

Bank Contracts

For individuals engaged on a Bank contract, typically we expect that you will experience fluctuations in hours worked and therefore pay each pay cycle. This means that hours worked in each pay cycle cannot be reliably predicted at the start of each pay cycle due to the casual nature of the job role that these contracts are set up for. To ensure compliance with  National Minimum Wage, you will not be eligible to participate in Pension Salary Exchange..

Defined Benefit Pension Scheme

If you are currently a member of a Defined Benefit (“DB”) pension scheme, you will not be eligible to participate in Pension Salary Exchange due to the mechanics of the DB scheme setup. You will continue to participate in your DB scheme as normal, and will not be affected by the introduction of Pension Salary Exchange.

No, the overall level of income tax relief that you are entitled to will not change by participating in Pension Salary Exchange.

For higher rate taxpayers, the effect of Pension Salary Exchange will be equivalent to you receiving tax relief at your marginal (highest) rate of tax immediately. As a result you will not have to claim any higher rate relief from HMRC as you do now.

However, please note that any higher rate taxpayers should review their tax code where pension relief was claimed in prior years from HMRC. This is to ensure that a change can be made prior to the Salary Exchange scheme being introduced to ensure double relief is not obtained (through the payroll and via your tax code). You can contact HMRC on the employee helpline (0300 200 3300) to check and make any necessary adjustments.

The Annual Allowance (maximum amount of tax exempt pension savings that can be built up in one tax year) is set at £60,000 for the 2023/24 tax year, although it reduces for higher earners. The rules are complex but broadly those with taxable income in excess of £200,000 could be affected. Where pension savings exceed £60,000 for 2023/24, an Annual Allowance tax charge is levied on the excess at the marginal rate of tax.

If you think this may be the case you may want to review your participation in Pension Salary Exchange or obtain independent financial advice. Further information about the Annual Allowance can be found at: www.gov.uk/tax-on-your-private-pension/annual-allowance.

Neither your Basic State Pension nor your pension from SGRS will be negatively affected by participating in the Pension Salary Exchange.

State Pension

Those reaching State Pension Age after 6 April 2016 will be able to claim the new State Pension. As long as your earnings in each tax year are at least equivalent to the Lower Earnings Limit (£6,396 in the 2023/24 tax year), your entitlement to the new State Pension will be unaffected by taking part in the scheme.

Statutory Maternity/Paternity Pay and Statutory Adoption Pay

Depending on your length of service and terms and conditions of employment, you may be eligible to receive Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) or Statutory Adoption Pay (SAP). SMP, SPP and SAP are calculated by reference to Average Weekly Earnings (AWE) for a set period. Accordingly, your AWE will reduce if you are part of a Salary Exchange scheme. SMP is calculated on the amount of AWE during the eight-week period set out by the Government. This eight-week period reference point must be fifteen weeks prior to the “expected date of confinement” (i.e. childbirth). The Salary Exchange schemes will reduce the amount of salary that is liable to NIC and therefore entitlement to SMP will also be reduced.

Although as a result of participation there might be a minor reduction in the first six weeks’ SMP, Pension Salary Exchange will not affect SMP for the remaining 33 weeks. Any enhanced maternity pay that you may be eligible to receive, will be calculated based on your Reference Pay.

SPP is payable at a fixed rate (£172.48 a week) or 90% of your AWE, whichever is lower and payable for up 2 weeks. SAP is paid at the same fixed rate or 90% of AWE, whichever is lower, but for 39 weeks.

Throughout periods of paid parental leave, all pension contributions will be maintained by Sanctuary. This means that you will be no worse off and may indeed be better off as a result.

If you think you may take parental leave in the near future and would like some additional information then please contact pensions.review@sanctuary.co.uk

Statutory Sick Pay (SSP)

You will not be eligible to participate in Pension Salary Exchange while you are in receipt of SSP only. However, you will be entitled to participate on your return to work. When you go on long term sick and are in receipt of SSP only, your employee pension contributions will change to be a net deduction from your pay and you will not be included in Pension Salary Exchange.

Any enhanced sick pay you may be eligible to receive would be calculated based on your Reference Pay.

Unpaid Leave

While you are on unpaid leave, your participation in Pension Salary Exchange will be effectively suspended and no contributions to the pension scheme will be made because you will have no Pensionable Pay. When you return to paid employment, as long as you have sufficient Pensionable Pay, your participation in Pension Salary Exchange will recommence.

State Pension Age

If you have reached state pension age and are not paying employee’s NIC you can still participate in Salary Exchange arrangements. However, the full benefit of a Salary Exchange may not be realised in this scenario.

Tax Credits

The Universal Credit (previously tax credits) calculation is based on your taxable (P60) income. When entering into Salary Exchange schemes there may be an impact on Universal Credit. If you think your entitlement to Universal Credit may be affected, we recommend you seek advice. The HMRC Tax Credit Enquiry line’s telephone number is 0345 300 3900.

Student Loans

If you are repaying a student loan to the Student Loans Company, your repayments may be reduced slightly when participating in Salary Exchange schemes as repayments are calculated on your Adjusted Pay.

Multiple Job Roles

If you have multiple job roles within Sanctuary, you will have a ‘named primary role’ within your employment documentation. Your eligibility to participate in Pension Salary Exchange will be based on your Reference Salary from this primary role. However, your employer pension contribution under Pension Salary Exchange will be based on all Pensionable Pay from all job roles held with Sanctuary. Hence, your overall Reference Pay and Adjusted Pay will be calculated based on all earnings from all job roles.

Additional Voluntary Contributions (AVCs)

Sanctuary recognises that, on occasion, individuals may wish to make one-off contributions to their pension, outside of the usual contributions made each pay cycle. This will still be an option for individuals, however any one-off AVCs made will continue to be on a net deduction basis (i.e., taken from net pay), and will not operate via the Pension Salary Exchange mechanism. The ability to make AVCs will be at the discretion of Sanctuary.

Child Benefit Charge

This tax charge removes or reduces the financial benefit of a parent receiving child benefit where you or your partner have what is called adjusted net income in excess of £50,000 per annum.

If you are impacted by the charge and participate in the Salary Exchange scheme, the salary you exchange will count as a reduction in your adjusted net income. This may mean that the impact of the charge is reduced or removed altogether depending on your specific circumstances.

Please note that Sanctuary cannot give financial advice. If you would like financial advice on this matter, you can find an independent financial adviser in your area via www.unbiased.co.uk.

In line with pension contributions, a Salary Exchange scheme is an effective way to contribute towards childcare vouchers and Cycle to Work benefits.

Where participating in multiple Salary Exchange schemes (e.g. Pension Salary Exchange and Cycle to Work) would bring your Adjusted Pay close to the NMW or Lower level for NIC purposes, you will not be eligible to continue in both/all schemes. When testing to ensure that NMW levels are met, the hierarchy of Salary Exchange benefits will be as follows:

1. Pension Salary Exchange
2. Childcare vouchers
3. Cycle to Work.

Should you be taken out of Pension Salary Exchange due to compliance with NMW requirements, your deduction will be taken as a net deduction until such a time when your Adjusted Salary post the Salary Exchanges for all the relevant benefits is sufficient for NMW purposes.  Deductions for Childcare Vouchers and Cycle to Work will be deferred until such a time when your Adjusted Salary post the Salary Exchanges for all the relevant benefits is sufficient for NMW purposes. 

Additional queries

If you are unsure what to do, you may wish to consult an Independent Financial Advisor.  www.unbiased.co.uk will provide you with details of local IFAs. IFAs may charge for providing this service. Neither Sanctuary nor the SGRS provider are authorised to provide independent financial advice and these documents do not constitute such advice. Sanctuary reserves the right to amend the terms or terminate the Salary Exchange Pension scheme in the future, if, for example, tax, NIC or pensions law or practice changes, or it is no longer viable for Sanctuary to operate it.

Please find a salary calculator below which will help you to determine the savings you can make by participating in pensions salary exchange.

Please note: The calculator contains macros which will have to be enabled to run a calculation.

The calculator can only be run on a PC/laptop, not via a mobile device.

• Click on the Salary Exchange calculator link, this will download a copy of the file to your PC/laptop.

• Through Windows File Explorer search for the file in your recent downloads

• Right-click the file and choose Properties from the context menu.
• At the bottom of the General tab, select the Unblock checkbox and select OK.
• Open the calculator and follow the notes below, the middle column in the results table ‘Increase in take home pay’ will show the NIC savings.

The following notes will help you to use the calculator successfully:

• Open the calculator
• Click cell ‘I understand and would like to proceed’
• Choose cell ‘Click here for a single member quote’
• Tax rate, choose either UK 2023/24 (for employees based in England) or Scottish 2023/24 (if Scottish Income Tax rates apply)
• Employer name – not required
• Employee name – not required
• Annual salary gross – add your salary, or estimated earnings
• Bonus – Zero (does not apply)
• Contribution basis – Percentage of salary
• Employee contribution % - add figure (minimum 4.5%)
• Employer contribution % - add figure (Sanctuary will match up to 7.0% of salary)
• % of Employer NI Saving to Pension – Zero
• Display results as – Annual (suggested)
• Click on ‘calculate results’.
• A cell with then appear asking if ‘Does the qualifying earnings’ band apply to this scheme’ Answer – No
• The results will then be displayed. Please take a screenshot if desired

Salary Exchange Calculator