What parts of salary count towards pension?
What parts of salary count towards pension?
That depends on which pension scheme you are a member of. The current position is:
| BAA Pension Scheme (joined before 1 April 1991) | Basic salary, certain allowances (e.g., Skills Based Pay) and Shift Pay |
| BAA Pension Scheme (joined after 31 March 1991) | Basic Salary, certain allowances (e.g., Skills Based Pay), LESS Lower Earnings Limit, plus Shift Pay |
| BAA Defined Contribution Pension Plan | Basic Salary and Skills Based Pay |
| BSC Group Personal Pension Plan | Basic Salary |
How does ‘Pensions Plus’ affect my pension?
‘Pensions Plus’ does not affect the amount of your pension that you build up, the potential dependant(s) pension payable after your death, or any death in service payments. The amount paid into the Scheme will not change and you still benefit from tax relief on your pension contributions.
How does ‘Pensions Plus’ affect my salary?
Pensions Plus varys (or amends) your terms and conditions of employment by reducing your salary for pension purposes by the equivalent of your personal contributions to the applicable scheme, in return for an equivalent employer contribution paid on your behalf.
Your pre-Pensions Plus salary (i.e. your total pay – which is your basic salary, plus all additions received, including allowances, overtime, etc. before taking into account the new Pensions Plus reduction) is known as your ‘reference salary’. Future pay increases and any other salary related payments that are calculated as a percentage of your basic salary, your overtime rate and any other colleague benefits continue to be based on your reference salary.
Your salary after any Pensions Plus is your ‘contractual salary’. This is the amount that NI Contributions will be paid against. Any enquiries from banks, building societies and other lenders will quote both your contractual salary and your reference salary.
What do I have to do to take advantage of ‘Pensions Plus’?
You do not need to do anything if:
- you are eligible to take advantage of the Pensions Plus arrangements i.e. your earnings after the sacrifice are above the National Minimum Wage (NMW) or National Living Wage (NLW) depending on your age; and
- you would ordinarily make NI Contributions. The pension scheme participation of all eligible colleagues will automatically change to a salary sacrifice basis. However, if you wish, you may choose at any time to opt out of this salary sacrifice arrangement as part of your continued pension membership (but see below on the restriction on when you could choose to opt back in)
You will be automatically enrolled into Pensions Plus unless you are ineligible to participate (as advised in writing by OneHR). If this is the case, you will make pension contributions from your gross salary.