Vodafone pensions

Q&As

Salary sacrifice

WHAT IS SALARY SACRIFICE?

Salary sacrifice is a method of increasing the amount of money you take home each month whilst retaining the same level of contributions to your pension. By participating in salary sacrifice, all contributions to your pension will be made by Vodafone.

HOW DOES SALARY SACRIFICE WORK?

Your salary is reduced by an amount equivalent to your normal pension contribution. HR keeps a record of your pre-sacrifice salary (your notional salary), which is used to calculate other Company benefits.

Vodafone contributes an amount equivalent to your normal pension contribution to your pension, together with any matched contributions as a Company contribution.

As your salary is reduced, you pay less National Insurance than you would if contributions were not made through salary sacrifice.

WHAT HAPPENS IF THE SALARY SACRIFICE WOULD REDUCE MY PAY BELOW THE NATIONAL MINIMUM WAGE (NMW)?

Your pay is not allowed to be reduced below the NMW as a result of salary sacrifice.

We have agreed with HMRC that if salary sacrifice would have the effect of reducing your salary below the NMW, then we will not operate salary sacrifice. The overall level of contributions into your pension remains the same, you won’t benefit from the National Insurance reductions described above, but you will get income tax relief on your contributions.

WILL I GET TAX RELIEF ON MY CONTRIBUTIONS?

As the Plan is set up on a salary sacrifice basis, you will not be subject to tax on the amounts sacrificed (and additional employer contributions).

However, if you decide not participate in salary sacrifice and instead pay a personal contribution with a deduction from your net pay, you'll get immediate income tax relief on your contributions to your pension account. This also applies to Additional Voluntary Contributions, which are not made by way of Salary Sacrifice.

WILL ANY OF MY STATE BENEFITS BE AFFECTED BY SALARY SACRIFICE?

It's possible that in some cases, benefits you receive from the State will be affected by the salary sacrifice arrangement. This is because you'll be reducing your declared earnings, which are used to calculate some State benefits.

For example, Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), Statutory Adoption Pay (SAP), Statutory Sick Pay (SSP) and Statutory Redundancy Pay (SRP) might be reduced, while Working Tax Credit (WTC) and Child Tax Credit (CTC) might be increased.

You should consider any benefits you may be receiving and whether participating in salary sacrifice, and therefore reducing your National Insurance Contribution, would affect them. Vodafone cannot give financial advice. If you are unsure, you may want to consult a financial adviser or visit the HM Revenue & Customs website.

You can find a financial adviser in your area by visiting: www.unbiased.co.uk

WILL MY STATE PENSION BE AFFECTED?

State pensions are paid from state pension age, which is currently between age 60 and 68 depending on when you were born.

With effect from April 2016, the two-tier State pension arrangement was replaced with a new, single tier system. Everyone who has paid NI contributions for 35 years by the time they take their State pension receives a pension worth £164.35 a week (in today’s terms). There is a deduction for any period of service in a contracted-out pension scheme.

Because the new system is flat-rate, i.e. there is no longer an earnings-related element, salary sacrifice will not affect your entitlement to the State pension – as long as you carry on earning more than the Lower Earnings Limit (£6,032 a year for the 2018/19 tax year).

The Department for Work and Pensions (DWP) can give you an estimate of how much State Second Pension you've earned so far, and the amount you're likely to have at state pension age.

You can apply for your State pension statement by visiting www.gov.uk/state-pension-statement for more information.

WHAT HAPPENS IF I GO ON LONG-TERM SICK LEAVE DURING THE PLAN YEAR?

If, whilst on long-term sick leave, you are only in receipt of Statutory Sick Pay (SSP) then your salary sacrifice will be stopped as it is not sacrifice SSP.

WHAT HAPPENS IF I GO ON MATERNITY LEAVE DURING THE PLAN YEAR?

You will continue to salary sacrifice in relation to the Plan unless you tell us otherwise.

If, whilst on Maternity or Adoption Leave, you receive Statutory Maternity Pay or Statutory Adoption Pay (SMP & SAP) or no pay, then your salary sacrifice will be stopped as you may not sacrifice SMP or SAP.

WHAT IF VODAFONE CANCELS THE PENSION SALARY SACRIFICE?

We're totally committed to the pension salary sacrifice as long as HMRC are happy to allow this type of arrangement to operate. However, if we do have to cancel the salary sacrifice arrangement for any reason, your contractual salary will simply go back to your notional salary. Vodafone is under no obligation, and doesn't accept any liability, to provide any form of compensation for any cash advantage lost from cancelling the salary sacrifice arrangement.

WHAT HAPPENS IF I GO ON INTERNATIONAL ASSIGNMENT?

If you go on international assignment your pension salary sacrifice position will be reviewed by HR as part of the preparation for your assignment.

WILL SALARY SACRIFICE IMPACT THE AMOUNT I CAN OBTAIN FOR A MORTGAGE?

No – for any mortgage enquiries about your income, HR will confirm your pre-sacrifice salary.