Important Information on the

Impact of Salary Sacrifice on Retirement Benefits

from April 2015 

Proposed changes to the NHS Pension Scheme from 1st April 2015 will change the way a Salary Sacrifice impacts on retirement benefits for somestaff.

Each year of pensionable pay counts separately towards the build up of final pension benefits. Therefore entering into any salary sacrifice arrangement (e.g Childcare Vouchers, Lease Car Schemes etc) that reduces gross pensionable pay will affect the amount of pension built up in that year. The overall effect from participating in a salary sacrifice scheme would reduce the amount of final benefits.

For staff who have Full Protection, i.e. within 10 year of normal pension age at 1st April 2012, they can remain in their existing section of the Scheme and pension benefits will be paid under the Final Salary arrangements and calculated using the best salary in the last 3 years before retirement and is usually the final year’s salary. A salary sacrifice in the period used to calculate retirement benefits will impact on the amount due.

For staff who have Tapered Protection, i.e. based on how many months beyond 10 year of normal pension age at 1st April 2012. For each month beyond 10 years, the tapered protection end date of 31 March 2022 is reduced by two months. They can remain in their existing section of the Scheme and pension benefits until the date of transfer to the new 2015 scheme and will be paid under the Final Salary arrangements and calculated using the best salary in the last 3 years before retirement and is usually the final year’s salary. A salary sacrifice in the period used to calculate retirement benefits will impact on the amount due.

The following calculator will identify the date of joining the new 2015 Scheme for staff:

http://www.nhsbsa.nhs.uk/Pensions/4019.aspx 

For all other staff WithoutProtection, pension benefits will be paid under the Career Average Revalued Earnings (CARE) arrangements and calculated using all pensionable earnings. A salary sacrifice will reduce earnings and therefore reduce pension benefits paid at retirement. To see how salary sacrifice arrangement will affect pension, staff can enter their details into the Salary Sacrifice Impact Calculator below.

Salary Sacrifice Impact Calculator