SMART is an efficient way of reducing the amount of National Insurance contributions (NICs) that you pay. SMART changes the way that your normal contributions and additional voluntary contributions (AVCs) are paid as follows:
1. Instead of you paying a percentage of your pensionable salary each month into the Plan, the Company pays an equivalent amount into the Plan. The Company also pays its normal pension contributions in addition to the SMART contributions.
2. Your salary is then reduced by an amount equivalent to your monthly contributions.
3. You no longer pay NICs on the amount equivalent to your monthly contributions, which normally means that your take-home pay increases.
This represents a change to your terms and conditions of employment. Your pre-SMART salary will continue to be your basic salary for other purposes such as pay reviews and mortgage or loan applications.
Eligibility
You will be automatically included in SMART on joining the Plan if your earnings, after any adjustment for SMART and any other salary sacrifice arrangements, exceed the NICs earnings threshold (£672 per month for 2016/17). If you earn less than this amount and do not currently pay NICs on your salary, then you are unlikely to benefit from SMART and will not be automatically included. If your circumstances change, for example, you move from part-time to full-time employment or if you have a second income that we are unaware of (and pay NICs on this income) you can opt to participate in SMART. If this applies to you then you should contact the Experian Pensions team at Capita about how to opt-in to SMART.
In addition, your salary cannot be reduced below the legal minimum wage. Therefore, in order to protect employees, the Company will check that your pay, after any adjustment for SMART and any other salary sacrifice arrangement that you have entered into, does not fall below the national minimum wage. If your pay falls below this level during any pay period you will be automatically opted-out of SMART. If your pay increases above this level you will automatically rejoin SMART. This also applies to SMART AVCs (see below).
Your participation in SMART will be continuous unless you tell us otherwise. You can vary your SMART contributions up to twice a year.
SMART Additional Voluntary Contributions (AVCs)
If you wish to make monthly AVCs, you will be automatically included in SMART for AVCs on joining the Plan if your earnings, after any adjustment for SMART and any other salary sacrifice arrangements, exceed the NIC earnings threshold (as above).
If your pay falls below this level during any pay period you will be automatically opted-out of SMART for AVCs. If your pay increases above this level you will automatically rejoin SMART for AVCs.
You should note that you may continue to participate in SMART for your normal contributions even if you decide not to participate in SMART for AVCs. However, you may not participate in SMART for AVCs if you do not already participate in SMART for your normal contributions.
How SMART affects your State Pension
Your basic State Pension is not affected by SMART so long as your earnings remain above the National Insurance lower earnings limit which is £5,824 per year from 2016/17. The Plan provides benefits in addition to any State Pension benefits you are entitled to.
There could be a small reduction in your State Second Pension (S2P) if you participate in SMART, but by participating in SMART you will receive an increase in your take-home pay which can be offset against any reduction in your S2P. The structure of the basic State Pension changed in April 2016. A new flat-rate pension of at least £155.65 in today’s money (2016/17) replaces the current State Pension and S2P if you are a man born on, or after, 6 April 1951; or a woman born, on or after, 6 April 1953.
From this date, you will need to have paid or been credited with National Insurance contributions for 10 'qualifying years' to qualify for the new State Pension, with the full pension payable if you have 35 or more 'qualifying years'.
The new State Pension will be the same for everyone, although those already claiming State Pension will continue to get basic State Pension and those who have built up S2P entitlement will get this too.
Your SMART benefits if you leave the Plan
If you decide to leave the Plan, contributions will no longer be paid into your account. What happens to your account when you leave the Plan will depend on how long you have been a member.
Employee pension contribution refunds are subject to the statutory refund tax, usually 20%. As there are no employee pension contributions under SMART, any Company payments made to discharge your rights under the Plan are treated as taxable income. As such, any Company payments will be grossed up at a rate equal to the difference between the statutory refund tax and your marginal tax rate, so that you are no worse off than if SMART had not been operating. Details will be provided by the Experian Pensions team at Capita and the Company at the relevant time.
Opting-out of SMART
You can decide to remain in the Plan but opt out of SMART before or after joining the Plan, in which case your salary would not be reduced and pension contributions will be deducted from your salary in accordance with the terms of the Plan. However, you would not benefit from the National Insurance savings available through SMART.
If you are enrolled into the Plan under automatic enrolment, you will participate in SMART unless you tell us otherwise. You may opt out of SMART only before or after joining the Plan (as above) or else you may choose to opt out of the Plan entirely, in which case, you will be treated as if you had never been enrolled.
If you decide to opt out of SMART for your normal contributions you cannot participate in SMART for AVCs.
If you wish to opt out of SMART you should contact the Experian Pensions team at Capita or you can complete and return the SMART opt out form.
SMART contributions during periods of absence
During statutory maternity leave, while you are receiving contractual pay, your SMART reduction will be based on the pay you receive provided that your pay does not reduce below the relevant statutory level. The Company will pay contributions based on the level of pensionable pay you would have had if you had been working normally, and will also make good any shortfall in your contributions.
This period will be treated as continuous pensionable service if you return to work after maternity leave. Maternity leave that is non-statutory, or unpaid, may not count as continuous service.
During statutory paternity leave, you will continue to participate in SMART provided your pay does not reduce below the relevant statutory level. Contributions will be treated in the same way as if you were on maternity leave.
If you take statutory adoption leave, your pension will be treated in the same way as if you were on maternity leave.
If you are on sick leave, you will continue to participate in SMART provided your pay does not reduce below the relevant statutory level. Where pay does fall below statutory limit, contributions will cease until your pay is sufficient to recommence the SMART reduction.
Pension contributions will not be paid during unpaid parental leave.