Yes, if you would like to pay towards all or some of the options available, you can do so. You will need to pay 3% into the ISA and/or Student Loan.
When you join SAP, you’ll be automatically put into the SAP scheme. This is known as automatic enrolment, and is a legal requirement for employees. Your automatic enrolment contribution rate is 3% of your basic salary, SAP pays 6% of your basic salary – this is the Pension Lite category.
You can switch out of the Pension Lite category at any time by logging in to the SAP flexible benefits portal. If you’re already paying into the pension at the higher rate, but are unable to commit to continuing with a 5% personal contribution you can also choose Pension Lite at any time and reduce your contribution to 3%. You’ll then receive a 6% contribution from SAP, plus the 7% NI passback.
Saving for your future has never been more important. Putting a little aside now can really help. Membership of the SAP pension scheme is a tax-efficient way to do this.
- The earlier you start the more time your savings have to grow.
- If you pay in the minimum of 5% of your basic salary, SAP will add 9% of your basic salary, bumping up the money going into your pension to 14% of your basic salary. If you don’t think you can commit to paying in 5% of your basic salary, Pension Lite may be the answer.
- Your payments will be taken via salary sacrifice and are taken from your salary each month before tax – so you pay less income tax and NI.
- Because SAP saves employer’s National Insurance by using salary sacrifice, they will also pay an additional 7% of whatever you pay into your pension each month. SAP calls this ‘NI passback’.
- The SAP pension scheme is a low cost, flexible group personal pension. This means that you’ll have your own pension policy within the SAP pension scheme. It’s in your name, you have the policy document, and you can select your investments from the range on offer, if you wish.
Pension is a part of the ‘Savings Choices’ SAP offer to help you get the savings habit. The other three are Pension Lite, Student Loan and ISA.
If you leave SAP’s employment, or decide to leave the pension scheme, you have the option of moving your pension savings to another pension arrangement. You’ll be given full details of your options at the time you leave.
Continue to pay contributions to the SAP plan from your own bank account and join your new employers’ arrangement.
Scottish Widows will write to you about 6-8 weeks after you leave SAP to give you information about your options. If you contact their customer service desk on 0345 755 6557 or send an online enquiry where they will send you a Direct Debit mandate to complete.
Transfer the proceeds of your SAP plan into your new UK employer’s scheme.
If you choose this option, you will need to liaise with the provider of your new employer’s scheme.
Do nothing and leave the SAP plan with Scottish Widows.
It will still participate in the funds you have selected and you can register to access Scottish Widow’s member site rather than the SAP portal to access details of your pension online. You will also still benefit from the low annual management charge you have as an SAP plan member. We suggest you seek advice from a professional financial adviser before making any decisions.
In any event please ensure Scottish Widows have up to date instructions as to who you would like your pension fund to go to in the event of your death. As you are leaving SAP any instructions you may have completed on the SAP benefits site will no longer remain recorded.
It is important to ensure that in the event of your death the value of your pension can be paid to your nominated beneficiary/ies direct by Scottish Widows as Trustees & Scheme Administrator. Your nomination form directs them as to who they should use their discretion to pay. As Trustees/Scheme Administrators Scottish Widows can pay the value of your fund without waiting for your estate to be settled.
If it is paid direct to your beneficiaries the fund value can be excluded from the value of your estate for inheritance tax purposes. The nomination form is here. Please complete this form and return it to Scottish Widows ASAP. They will be guided by your latest dated form.
Further information is available here.
Please contact Scottish Widows on 0345 755 6557 (Mon-Fri 10am-4pm) if you have any queries regarding this.
Since April 2015 you have more choice as to how you take your pension changes, very briefly they are:
- Take your entire fund as a cash lump sum – up to 25% of this amount will be tax-free, the remainder will be taxed at your marginal rate. You can use this cash in any way you want – you may choose to invest it to boost your income in retirement or set it aside for a rainy day. Whatever your plans, it’s entirely up to you to decide how to use the cash.
- Take your entire fund as a series of cash lump sums – for each sum, 25% can be taken tax-free and the remainder taxed at your marginal rate.
- As before, take up to 25% of your fund as tax-free cash and use the remainder to purchase an annuity.
- Take up to 25% of your fund as tax-free cash and invest the remainder in a ‘drawdown’ product, which allows you to keep your money invested in a tax-exempt environment and draw an income periodically by cashing in part of your fund.
- Alternatively, if your total funds under the scheme are less than £10,000 and you are at least age 55 you may be able to draw your entire fund as cash. This can apply to up to three separate personal pension schemes and 25% of the payment would normally be tax-free.
You have the option to take all of your pension savings as a cash lump sum. 25% will be paid tax-free and the rest will be taxed at your normal tax rate.
You’ll need to consider whether taking all your cash in one go is the best choice for you, as you won’t get any more money from your savings if you do. Also, please think seriously about taking independent financial advice before you make any decisions; you can find an independent financial adviser in your area at https://www.moneyadviceservice.org.uk/en/articles/choosing-a-financial-adviser.
You can take your pension savings as a cash lump sum once you reach 55 (currently the earliest retirement age) unless you become seriously ill.
If you want the security of an income, but the flexibility of taking lump sums when you need them, you can take a mixture of options when you retire.
For example, you could use some of your savings as a cash lump sum, take some to buy an annuity that will provide a secure income for life, and use the rest to transfer to another pension provider to provide drawdown lump sums as and when you need them.
You can take your pension savings from age 55 (currently the earliest retirement age) unless you become seriously ill.
An annuity is an income payable for life that you buy with your pension savings from an insurance provider.
You can use your entire fund to buy an annuity, or take up to 25% of your savings as a tax-free lump sum and use the rest to buy an annuity.
You’ll have lots of choices when it comes to buying an annuity, such as:
- Which insurance company you choose
- Whether you want to leave your dependants a pension if you die before them
- Whether you want a flat rate income or whether you want it to increase every year
There are many other factors to consider, and they will all affect how much you’ll get when you retire, so it’s important that you think carefully about what you need. Also, please think seriously about taking independent financial advice before you make any decisions; you can find an independent financial adviser in your area at https://www.moneyadviceservice.org.uk/en/articles/choosing-a-financial-adviser.
You can use your pension savings to buy an annuity once you reach 55 (currently the earliest retirement age) unless you become seriously ill.
You can start to withdraw your pension savings from age 55. This is currently the earliest age, unless you become seriously ill. This minimum retirement age will be increasing and will always be ten years before state retirement age.
Some people may find that whilst they have paid in more to the pension in a tax year than their Tapered Annual Allowance (TAA) ‘allows’ they are able to avoid a tax charge by ‘mopping up’ unused personal allowances from the three previous tax years. You firstly need to decide if this affects you – see the guide for more information. If you find you have paid in more than your TAA, you will need to disclose this in your self-assessment, and there will likely be a tax liability (charge).
If you have calculated that you will be liable to additional tax on the standard SAP pension contributions, we offer alternative options. You can select one of these here on the Savings Choices form.
Tapered Allowance of £10,000 and contributions to the pension maintained by you and the Company.
Your personal contribution is based on 5% of a capped salary of £68,500; SAP also give 7% of this in respect of their NI passback. SAP’s contribution of 9% of your basic salary is paid in but only so a total of @ £833 is paid in each month (made up from you, NI passback and SAP). The balance of the Company pension contribution is paid to you as a cash allowance less employer National insurance of 13.8%. The cash allowance is taxable as additional income.
If you want to pay in more to the pension you can do so by making a bonus sacrifice at the end of the year once your total adjusted income is known and you have calculated your own tapered allowance.
- If you are capped with a tapered annual allowance of £4,000 please contact the SAP helpdesk here.
- The third option is for people to utilise the Savings Choices
Here you can direct your personal contribution to the Corporate ISA (minimum 3% of gross salary but deducted from net pay) and SAP pay 9% of a capped salary of £110,000 to the pension. So £833 is paid to the pension. The balance of the SAP contribution is paid to you as a cash allowance as described above.