What do I pay?
In DB Core, you contribute 6% of your Pensionable Earnings each month and in DB CorePlus you contribute 9% of your Pensionable Earnings each month. The contribution rates are reviewed roughly every three years and might change in the future (see below).
What does Nestlé pay?
Nestlé pays the balance of the cost of providing the benefits you build up and also makes additional payments as required to cover any funding shortfalls.
The cost of building up benefits in DB Core and DB CorePlus is shared between Nestlé and members. This allows Nestlé to share some of the risk involved with providing Defined benefit (DB) pension arrangements with members.
In DB Core, Nestlé pays two thirds of the contributions (currently 12% of Pensionable Earnings) and members pay one third (currently 6% of Pensionable Earnings). In DB CorePlus, Nestlé makes the same contribution as it does for DB Core and members of DB CorePlus pay the remaining cost (currently 9% of Pensionable Earnings).
Contribution rates are reviewed after each financial health check, or ‘actuarial valuation’. A valuation normally takes place every three years. As part of these valuations, Nestlé and member contribution rates are reviewed and changed if necessary.
The next time the rates could change is likely to be in 2020 after the 2018 valuation. If the contribution rates change, you will be given at least three months’ notice and have the opportunity to change sections if you want to.
Increasing your benefits
You have the option to pay Additional Voluntary Contributions (AVCs). AVCs are contributions that you can make on top of your main contributions to provide additional benefits at retirement. AVCs are particularly useful if you are thinking of retiring early or if you wish to make up for times when you were not building up pension. Nestlé doesn’t pay anything towards your AVCs.
As they are paid into DC Core, AVCs build up on a Defined Contribution (DC) basis. See DC Benefits for information about how DC Core works. For details of how AVCs work and how to make them see Benefits of AVCs.
Unless you choose to opt out in advance, you will automatically be entered into a salary sacrifice arrangement after you have been a member of the Fund for two years.
Salary sacrifice is a tax efficient way of making contributions to your pension savings. It is an arrangement between you and Nestlé where you agree to a reduction in your salary and in return you receive a benefit. In this case the benefit is a contribution to your pension. All contributions to the Fund (including any Additional Voluntary Contributions (AVCs)) automatically receive tax relief. But with salary sacrifice, you can save on National Insurance (NI) contributions as well. It works like this:
- You stop making pension contributions and agree to reduce your gross monthly pay by the value of those contributions (including AVCs)
- In return, Nestlé pays an equivalent amount directly to your pension on your behalf
- This is in addition to the employer contributions that Nestlé make to your pension
- You save on both tax and NI contributions as your taxable income is reduced by the amount you agree to give up
- Nestlé also saves on NI contributions as your pay is lower.
Salary sacrifice is not currently available to employees of Galderma and Osem.
By signing your contract of employment, you have consented to being automatically entered into salary sacrifice for the payment of your pension contributions on the first of the month after you have completed one month’s or two year’s membership of the Fund, depending on when you joined. You should take some time to read 'What should I consider?' below to make sure that salary sacrifice is right for you. If you don’t want to make pension contributions by salary sacrifice, you can opt out. Details of how to opt out are included in the What if section below.
In salary sacrifice, you will have a Reference Salary which is equivalent to your pay or salary before you make the sacrifice. Nestlé will use your Reference Salary to calculate all salary-related employment benefits such as pay increases, bonuses, holiday pay, life assurance, sick pay, maternity pay and overtime. This means that none of these benefits will be affected by making your contributions by salary sacrifice. We also use your Reference Salary to determine your Pensionable Earnings and calculate the contributions you and Nestlé pay.
Although most people will benefit from salary sacrifice, in some circumstances, salary sacrifice may not be suitable for you. You should be aware of the potential drawbacks and take them into account before deciding whether salary sacrifice is right for you.
Salary sacrifice could affect your current or future entitlement to a range of state benefits, including tax credits. This is because you need to earn more than the Lower Earnings Limit (the ‘LEL’, which is £5,876 a year or £490 a month in 2018/19) to be eligible to receive a number of state benefits. If your earnings (after salary sacrifice) fall below the LEL, you will not be eligible for: Statutory Sick Pay, SMP (see below), Statutory Paternity Pay, Statutory Adoption Pay, Incapacity Benefit and Jobseeker’s Allowance. More information on state benefits can be found below and at: www.gov.uk/browse/benefits.
To check if your tax credits will be affected, phone HMRC’s tax credit helpline on 0345 300 3900 or visit www.gov.uk/browse/benefits/tax-credits .
Statutory maternity pay:
If you qualify for SMP, you will receive 90% of your average weekly earnings for the first six weeks of your maternity leave, followed by the lower of £140.98 a week (standard weekly rate 2018/19) or 90% of your average weekly earnings for the rest of your period of paid maternity leave. You will continue to make contributions to the Fund through salary sacrifice whilst you receive SMP, unless it has the effect of reducing your income to below the standard weekly rate. If this occurs, we will take you out of salary sacrifice until you return to work after your maternity leave. This ensures that you do not receive less than the standard weekly rate and can continue to benefit from salary sacrifice where possible.
If you have not paid enough NI on your income, your State Pension may be reduced at retirement. You may also be affected if you pay the married woman’s reduced rate of NI.
National Living wage
Salary sacrifice should not reduce your cash pay to below the National Living Wage. This means that if you are working full time and earn around £13,000 or less, you should take care when considering entering into a salary sacrifice scheme.
…I want to opt-out?
If salary sacrifice is not right for you or you decide that you do not want to make pension contributions by salary sacrifice for whatever reason, you can choose to opt out. If you decide to opt out, you will carry on paying contributions directly from your salary. You will continue to receive tax relief on your contributions under current legislation, but will also continue to pay NI on the value of your pension contribution each month. To opt out, you should contact Nestlé Pensions for a Salary sacrifice opt-out form.
…you are over State Pension Age and no longer pay National Insurance?
You will not save any money by participating in salary sacrifice because you no longer make NI contributions. However, unless you tell us otherwise, we will still include you in salary sacrifice so that Nestlé can benefit from the reduced employer NI contributions due on your pay.
…you decide to participate in salary sacrifice for other benefits?
Making pension contributions through salary sacrifice will not normally have any impact on other salary sacrifice arrangements you choose to join. However, the exception would be if it has the cumulative effect of reducing your total post-salary sacrifice take-home pay to below either the Lower Earnings Limit or the National Living Wage. For more information, see Is salary sacrifice right for you?.
…you are repaying a student loan?
If you participate in salary sacrifice, your loan repayments will reduce slightly because they will be based on your lower post-salary sacrifice take-home pay figure.
…you need a financial reference to get a mortgage or loan?
If you participate in salary sacrifice, your payslip will look slightly different. The salary sacrifice amount will be shown as an adjustment with brackets around it under the Pay & Allowances column on your payslip, to show that you are participating in salary sacrifice. Your P60 (the summary of your pay and the tax that has been deducted from it in the tax year, which Nestlé provides you after the end of each tax year) will reflect your reduced post-salary sacrifice take-home pay. You should bear this in mind if using your P60 for a financial reference (e.g. a loan). If you require a reference for mortgage or loan purposes, Nestlé will tell lenders about your Reference Salary. Lenders are interested in your disposable income and so should take into account the fact that no pension contributions are being deducted from your post-salary sacrifice take-home pay.
…Nestlé decides to end salary sacrifice in the future?
Salary sacrifice is a voluntary arrangement, which Nestlé could choose to stop offering at any time. At present, we intend to operate salary sacrifice indefinitely. However, we reserve the right to withdraw salary sacrifice if tax, NI or pensions law changes or if it is no longer commercially viable to operate salary sacrifice. If this happens, you will simply go back to making pension contributions and AVCs directly from your own pay. You would not have to repay any of the savings received whilst salary sacrifice was in force.