By reducing the National Insurance you pay, it increases your take-home pay. At the same time, it's an efficient way for TSB to provide your pension and to save money in the process.
No. Contributions made to your account are calculated as a percentage of your basic pay before the reduction for SmartSaver. As a result, the amount of contributions made to your account is not affected.
Yes. You can change the amount of contributions made to your pension pot (except company contributions) at any time.
You can make a one-off lump sum contribution at any time, but it will not benefit from National Insurance savings.
Yes. SmartSaver applies to all regular contributions to your TSB Pension Scheme made directly through the payroll. Please note that if your contributions take your pay below the National Minimum Wage you will automatically be removed from SmartSaver. The contributions will still qualify for tax relief but will not be eligible for National Insurance savings. This maybe particularly relevant for members who choose to make large additional contributions. Refer to www.hmrc.gov.uk for current National Minimum Wage rates; these are usually updated in October each year.
It will have no impact on your Basic State Pension. However, the impact on the State Second Pension (S2P) is more complex and a detailed note will be provided shortly.
Participation in SmartSaver decreases the contractual gross pay you’re entitled to receive. However, TSB continues to record your ‘notional pay’, which is your base pay before SmartSaver. Your notional pay will be used as the basis for calculating all pay-related benefits and payments, including bonus, life assurance, annual pay review etc. So your participation in SmartSaver does not impact any other aspects of your pay.
Any future pay awards or promotions will be based on your notional annual pay before the SmartSaver deduction. Any pay awards or promotions, will increase your notional pay before the SmartSaver deduction is made. Should you leave SmartSaver, your actual pay will revert to the level it was before the deduction was made taking account of any pay awards or promotions that have occurred in the interim period.
If you have a student loan and earn over £1,409 per month (2014/15 tax year) your repayments are deducted from your salary. If SmartSaver takes your monthly earnings below this figure your repayments may be stopped or reduced and the period over which you are repaying your student loan would increase.
Child Support Agency (CSA) assessments and Court Orders are usually based on your net pay which will increase as a result of SmartSaver. This is not always the case and the order may be explicit about the definition of pay to be used.You should contact the CSA or the Citizens Advice Bureau for more information or take legal advice if you are unsure on the matter.
Reducing your pay through participating in SmartSaver may reduce the amount of statutory maternity pay (SMP) you could receive. This is because the higher rate of SMP, which is paid for the first six weeks of the maternity pay period for those who qualify, is based on the amount of your contractual earnings which count for National Insurance purposes. If your pay on which National Insurance contributions has been calculated has been reduced, then it follows that the amount of SMP received will be lower.
SMP is calculated with reference to your earnings during an eight week period commencing 23 weeks prior to the Expected Week of Childbirth. You will need to consider opting out of SmartSaver before the commencement of 23 week period in order to avoid a reduction in your SMP.
If your earnings are below the threshold at which SAP would be affected (ie £5,772 (2014/15 tax year) per year) we will not let you participate in SmartSaver.
Entitlement to most other state benefits (such as sick pay, incapacity benefits and job seekers allowance) is determined by the length of time in which you are treated as having paid National Insurance contributions rather than the actual amount paid. Participating in SmartSaver will not affect your future entitlement to these benefits and if your earnings are below the level at which such benefits would be affected we will not let you participate in SmartSaver.
If you are receiving Income Support or Jobseeker’s Allowance you should contact your local social security or Jobseeker Plus office to find out more.
If you are not receiving either of these benefits, but are receiving Housing Benefit and/or Council Tax Benefit you should contact your Local Authority.
Participation in SmartSaver reduces your taxable cash earnings.Tax credits such as the working tax credit and child tax credit are, broadly speaking, greater at lower levels of taxable earnings. So your entitlement to these tax credits could increase as a result of your participation in SmartSaver.
For further information on tax credits contact the HM Revenue and Customs helpline on 0845 300 3900.
Most mortgage providers are aware of salary sacrifice schemes such as SmartSaver and will grant loans based on your base pay before the reduction for SmartSaver. You should quote that figure on any mortgage applications.