PensionSMART FAQs

1. You enter into a formal salary sacrifice agreement with Imperial, so that you do not pay the standard member contribution to the pension scheme. This salary sacrifice agreement is called PensionSMART.

2. Imperial instead pays an increased employer contribution (equivalent to the sum of the normal employee’s and employer’s contributions), directly into the pension scheme you are enrolled in. The current pension contribution rates are:

• For USS – a total contribution of 20.6% (made up of a 6.1% employee contribution plus a 14.5% employer contribution).

For SAUL Start - a total contribution of 21% (made up of a 6% employee contribution plus a 15% employer contribution). Your salary is reduced by the amount set out above. This revised salary (together with any non-pensionable pay to which you may be entitled) is known as your “Adjusted Salary”.

3. Your take home pay increases because your National Insurance Contributions (NIC) are reduced. Imperial makes NIC savings in the same way.

4. The overall level of contributions to the pension scheme do not change as a result of participating in PensionSMART. Your level of pension benefits is not affected. The pension you draw on retirement is unchanged.

5. If you wished to pay Additional Voluntary Contributions (AVC’s) you may also be able to pay these using PensionSMART and benefit from extra National Insurance savings. Even if you cannot pay AVC’s by PensionSMART you will still benefit from tax relief on any extra contributions you make

Example 1: USS: The example below compares the position of an employee who has not joined PensionSMART with one who has, in both cases using a Pensionable Salary of £33,000 per year contributing £2,013 (being 6.1% of Pensionable Salary) per year into USS. The employee is not in receipt of any pensionable allowances. Under PensionSMART the employee’s Pensionable Salary remains at £33,000 and the PensionSMART Salary (i.e. after the adjustments described above) is £30,987.

Salary comparison

The employee’s net take-home pay has increased. Total contributions to the USS have remained the same and the member’s pension benefits will continue to be based on their Pensionable Salary, £33,000.

Example 2: SAUL Start: The example below compares the position of an employee who has not joined PensionSMART with one who has, in both cases using a Pensionable Salary of £25,730 per year and thus contributing £1,543.80 (being 6.00% of the Pensionable Salary) per year into SAUL Start. The employee is not in receipt of any Other Pensionable Pay Elements. Under PensionSMART the employee’s Pensionable Salary remains at £25, 730 and the PensionSMART Salary is £24,186.20.

Salary comparison

The employee’s net take-home pay has increased. Total contributions to SAUL have remained the same and the member’s pension benefits will continue to be based on their Pensionable Salary i.e. £25,730.

The increase in your take home pay under PensionSMART depends upon which pension scheme you belong to, your pensionable salary, and the rate at which you pay NICs. Ready reckoners are provided for each pension scheme. Please note that if you also participate in other salary sacrifice schemes, such as for childcare, the NIC savings may not be as great as is suggested in the PensionSMART Ready Reckoner - v7.0.0. Participation is still worthwhile, however, and a generic explanation of how to calculate the savings is provided in the general material and FAQs concerning  salary sacrifice.

The term "Pensionable Salary" refers only to pay which counts for pension purposes. It comprises the sum of your basic salary plus any other pensionable allowances that you are entitled to before the pension reductions (described above) are applied. It does not include non-pensionable allowances.

Yes. Your Pensionable Salary is made up of your Basic Salary and, for some members, other pensionable allowances (see the Terminology section for examples). Under PensionSMART, Pensionable Salary will continue to be calculated as the total sum of your Basic Salary (and any other pensionable allowances) before the PensionSMART reductions are applied, and therefore it will not change.

Not at all. All future pay rises will continue to be based on your annual contractual salary (i.e. your salary before the PensionSMART adjustment has been made). Similarly, all pay calculations which are derived from Basic Salary e.g. overtime, will also continue to be calculated on your annual contractual salary. 

Yes. By joining PensionSMART you agree to amendments to your Terms and Conditions in accordance with the provisions of Section 4 of the Employment Rights Act 1996. These are set out in the PensionSMART-Supplementary-terms-and-conditions-of-employment (pdf). It is important that you understand the changes to your Basic Salary and other pensionable allowances (if you have any). If you are eligible to participate in PensionSMART, you will automatically be included. However, we must emphasise that you do have the right to opt out of the arrangement. 

You do not need to complete any forms to participate in PensionSMART. You will be included automatically unless it may not be beneficial for you (see question ‘Are there any circumstances where it may not be advantageous to participate?’ for further clarity on this).

When first joining Imperial, you can opt out by ticking ‘No’ on the ‘Employee Starter Checklist Form’ which you will receive with your Contract of Employment. 

Otherwise, you can leave PensionSMART on the annual scheme anniversary date of 1 December each year by sending an email to pensions@imperial.ac.uk and stating your intention to opt-out no later than 30 November each year.

If you choose to opt out of PensionSMART you will still be able to participate in the pension scheme and make pension contributions under the usual arrangements. You will not, however, be able to take advantage of the NIC savings (which also result in an increase in take home pay).

By participating in PensionSMART, you are agreeing to stay in the scheme for at least a year. If you no longer wish to be part of PensionSMART, you will be able to opt out with effect from 1 December each year.

Additionally, you will be able to opt out within three months if you experience one of the following “lifestyle events”:

• Birth/adoption of a child
• Notification or commencement of maternity leave
• Return from maternity leave
• Divorce/separation
• Death of a partner
• Marriage/civil partnership
• Commencement of or return from long term sickness
• Significant changes in working hours e.g. move from full-time to part-time
• Material changes in partner’s circumstances (e.g. redundancy)
• Commencement of or return from sabbatical or unpaid leave
• Commencement of or return from an overseas secondment
• Reaching State retirement age
• Leaving the pension scheme
• Cease to be eligible to participate in the pension scheme

In these cases, you may opt in or out of PensionSMART at a time other than the usual December anniversary date. Should you wish to opt in or out you should send an email to pensions@imperial.ac.uk as soon as reasonably practicable within 3 months of the event occurring stating your intention.

If you decide to opt out of PensionSMART you will next have the opportunity to review your decision and elect to participate again in PensionSMART with effect from any subsequent 1 December. You will also be able to elect to participate in PensionSMART if you experience one of the “lifestyle events” listed in the previous answer or one of the additional changes listed below:

• Moving from a fixed term contract to an open-ended contract
• Becoming eligible to join the pension scheme.

Should you wish to re-join PensionSMART after experiencing any of these events, you should email pensions@imperial.ac.uk as soon as reasonably practicable within 3 months of the event occurring, stating your intention.

It will not be advantageous for you to participate in PensionSMART if any of the following apply to you:

• Participation in PensionSMART would bring your Adjusted Salary (after the PensionSMART reduction) to below the National Minimum Wage (therefore you are not eligible to participate);

• Your Adjusted Salary after taking into account PensionSMART would fall below the Lower Earnings Limit for NICs;
• You plan to leave the pension scheme within two years of joining and take a refund of contributions.

We will not enter you automatically into the scheme if either of the first two categories apply to you and we will contact you separately about this. However, if you believe that you may fall into one of the above categories, please contact pensions@imperial.ac.uk 

You will be able to participate in PensionSMART providing your Adjusted Salary is not reduced to below the National Minimum Wage or National Living Wage. We will advise you if you are likely to be affected. However, if your circumstances change you should contact hrstaffhub@imperial.ac.uk 

Imperial provides college maternity/shared parental/adoption/surrogacy pay over and above Statutory Maternity/Shared Parental/Adoption Pay (SMP, SPP, ShPP, SAP). For further details and to assess your eligibility, please see the relevant Family Leave policy. Any Imperial maternity/shared parental/adoption/surrogacy pay you are eligible to receive will be calculated based on your normal salary therefore you will be no worse off. Unless you opt out of PensionSMART, you will continue to exchange an amount equivalent to the standard employee contributions from your pay during any period you are in receipt of Imperial maternity/shared parental/adoption/surrogacy pay, provided that this does not reduce your Adjusted Salary to below SMP/SPP/ ShPP/ SAP.

If you are not entitled to Imperial maternity/shared parental/adoption pay for all or part of your ordinary maternity/shared parental/adoption leave, you may still be eligible to receive SMP/SPP/SAP (see the relevant Family Leave policy for further details). Your SMP/SPP/ ShPP/ SAP will be calculated based on your Adjusted Salary in line with statutory requirements, however Imperial will top up the statutory payments so that the amount of pay you receive will continue to be based on your annual contractual salary. You will therefore be no worse off.

Imperial provides college sick pay over and above Statutory Sick Pay (SSP). Imperial sick pay will still be calculated with reference to your annual contractual salary and will therefore not be affected by participation in PensionSMART. Unless you opt out of PensionSMART you will continue to exchange an amount equivalent to the percentage set out in paragraph 2.1 of "PensionSMART-Supplementary-terms-and-conditions-of-employment (pdf)”  of your sick pay during any period you are in receipt of Imperial sick pay, provided that this does not reduce your Adjusted Salary to below SSP.

If you are not entitled to Imperial sick pay you may be entitled to SSP. SSP is paid at a flat rate and will not therefore be affected by participation in PensionSMART (providing you earn above the NIC Lower Earnings Limit (see HMRC website for current limits). You will therefore be no worse off than at present.

You will continue in membership of USS or SAUL and will automatically participate in PensionSMART unless it is disadvantageous to you to do so, or you opt out.

On leaving Imperial’s employment, your participation in PensionSMART will come to an end automatically and without further formality. If you transfer to another UK university you will be able to continue in membership of USS or, if within a London University, in SAUL, but whether or not you can take advantage of the NIC savings offered by PensionSMART will depend upon whether your new employer operates an equivalent salary sacrifice scheme.

If you leave the pension scheme more than two years after joining (whether or not this coincides with the end of your Imperial employment), you will have the choice of:

• any pension or lump sum you have earned in the scheme will remain until you reach and age where you can start to receive your pension, or
• your pension fund in SAUL Start will remain with Legal & General but no further contributions can be added, or
• you could decide to transfer your pension fund to another pension arrangement.

If you leave the pension scheme within two years of joining, and are in PensionSMART, you will have the choice of:

• refund of employee contributions within the first three months (except for SAUL Start members where you can only receive a refund of contributions within the first 30 days of joining the scheme).
• no refund of employee contribution beyond three months.  A deferred pension and lump sum which are payable when you retire or a transfer value, if you elect to transfer your pension to another arrangement. 
• If you make direct contributions to the pension scheme, and don’t pay via PensionSmart - a refund of the employee only contributions minus tax and national insurance.

If you do not opt out and therefore benefit from PensionSMART, you will not have made any employee pension contributions so if you leave the pension scheme within two years there will be no refund payable to you for any periods of participation in PensionSMART. If you do think that you may leave the pension scheme within two years of joining, participating in PensionSMART may not be advantageous to you and you may therefore choose to opt out.

Imperial will advise lenders of your annual contractual salary before the PensionSMART adjustment has been made. 

Death in service lump sum and benefits from the pension scheme remain unchanged as a result of PensionSMART.

Yes, your pension benefits will remain unchanged as your Pensionable Salary is not affected by PensionSMART. Your pension at retirement is determined by the terms of the scheme, reflecting the total contributions made during the period of membership.

If you have any additional questions, please send an email to pensions@imperial.ac.uk