Contributions

Salary Sacrifice doesn’t alter your entitlements under the Scheme. Nor does it affect the amount of your pension benefits, your dependants’ benefits or entitlements, or your death in service benefits.

The actual amount paid into the Scheme is the same and you still benefit from tax relief on your pension contributions.

Salary Sacrifice involves a variation to your terms and conditions of employment that reduces your contractual basic salary by the equivalent of your contributions into the Scheme. In return, Babcock makes an equivalent employer contribution into the Scheme on your behalf.

Your pre-Salary Sacrifice salary (that is your basic salary before taking into account the new Salary Sacrifice reduction) is known as your reference salary. Future pay increases will be based on your reference salary. Your overtime rate and any other employee benefits will also be based on your reference salary. Replies to any enquiries from banks, building societies or any other lenders will also quote your reference salary.

For example:

Pension contributions are eligible for Income Tax relief, but not National Insurance (NI) relief.

This means that if you were paid £1,000 per month by your employer and you want to pay £100 into your company pension, your Income Tax liability would be calculated on just £900 of your pay. So you only pay around £180 in Income Tax rather than £200 (assuming you’re a basic rate taxpayer).

However, your NI is calculated on the whole £1,000 at a rate of 12% (but note that this will be increasing to 13.25% for the 2022/23 tax year), costing you £120. Instead of paying you £1,000, your employer pays you £900 and makes an employer contribution into your pension of £100 through Salary Sacrifice, you’ll save some money.

You still end up with the same amount in your pension (£100), and you still pay the same amount of Income Tax (£180), but you’ve reduced your NI costs.

You now only pay £108 NI on your £900 salary, saving you £12 per month.

Actual savings will differ for each member as the savings are dependent on how much you earn and how much you contribute to the Scheme.

Savings reduce once your income goes over the Upper Earnings Limit (£50,270 for the 2021/22 tax year) because your personal liability to NI drops to just 2% above this threshold, but it’s still a way to save money. In the example above the saving would be £2 per month on a pension contribution of £100.

Salary Sacrifice is unsuitable for a handful of members. If your basic salary is at, or close to, the National Minimum Wage (NMW) you won’t be able to participate in Salary Sacrifice as Babcock cannot reduce your contractual hourly rate below the NMW. If this applies to you, the Company will write to you separately explaining the issues.

If you’re paid at, or close to, the threshold at which NI contributions are payable you won’t be eligible to participate in Salary Sacrifice because you could lose your entitlement to certain State Benefits. If this applies to you, the Company will automatically remove you from Salary Sacrifice. You can opt back in if your circumstances change. Contact your HR representative for more information.

Mortgage providers and banks are used to companies using Salary Sacrifice arrangements. Your reference salary (your salary before Salary Sacrifice) will be provided to banks, building societies and any other mortgage provider.

Yes, as contributions will continue to be paid based on your Statutory Maternity Pay or reference salary. If you wish to opt-out of Salary Sacrifice or discuss this, please contact your HR representative.

No, your benefits from the Scheme will be unaffected. If you’d like further information about your Scheme pension, please call the Aviva customer services helpline on 0345 6044463

If you are over State Pension age but still working, you’ll no longer be making NI contributions so you wouldn’t benefit from making contributions through Salary Sacrifice. However, as Babcock still pays NI contributions and will therefore make savings you’ll automatically be included in Salary Sacrifice unless you opt-out.

Your division may already have other benefit arrangements, e.g. childcare vouchers, which involve you converting part of your reference salary. When considering whether to take part in Salary Sacrifice, you should consider what your basic salary would be after being reduced for any other benefits.

If you then regularly earn below the minimum participation salary, and you could potentially lose entitlement to certain State contributory benefits, you may wish to opt-out of Salary Sacrifice.

Yes, all additional regular contributions can be made through Salary Sacrifice. You can also make one-off contributions through Salary Sacrifice, but this must be agreed with Babcock before the month in which the sacrifice will take place. For example, for a one-off contribution to take effect from August, this must be agreed with Babcock by 31 July.

You can make contribution changes at any time.

Babcock will ensure that you’ll receive the same statutory adoption, maternity, paternity or sick pay payments if you opt in to Salary Sacrifice as you would have done had you opted out.

Entitlement to some State Benefits, such as incapacity benefit and Job Seekers Allowance, are based on the amount of NI contributions you make. Others include bereavement parent allowance and widowed parent allowance.

If your revised basic salary (post-Salary Sacrifice) is taken close to or below the Lower Earnings Limit then your entitlement to some State Benefits may be affected so you may wish to opt-out.

If your basic salary falls below the minimum participation salary during any pay period, the Company will automatically take you out of Salary Sacrifice until your basic salary exceeds the minimum participation salary again.

Other State Benefits aren’t based on your NI contributions but are means-tested. Making your Scheme contributions through Salary Sacrifice won’t have an impact on your entitlement to these.