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PensionsExchange Factsheet

UCL introduced PensionsExchange to employees in USS or SAUL pension schemes from 2010. PensionsExchange operates by allowing National Insurance Contribution (NIC) savings to be made through changing the way that pension contributions are paid. Other universities such as University of Oxford, University of Cambridge, the LSE and Imperial College London also operate such a scheme. This Factsheet covers the benefits to you and how the scheme works. Further information including a set of Frequently Asked Questions can be found in the Employee Guide available from the UCL Pension Services website or by contacting UCL Pension Services.

Why did UCL introduce PensionsExchange?

The USS and SAUL rules changed to allow additional pension contributions to be made by the employer under PensionsExchange. Employee pension contributions are reduced to nil and as a result, the employee’s take home pay should increase. The amount saved depends on the employee’s earnings level. The table below provides an indication of the annual NIC savings available to the employee:

SAUL (6%) USS (8%)
Annual Salary (£) Annual Employee NIC saving (£)* Annual Salary (£) Annual Employee NIC saving (£)*
15,000 108.00 35,000 336.00
20,000 144.00 40,000 384.00
25,000 180.00 45,000 432.00
30,000 216.00 50,000 (i) 180.00
35,000 252.00 55,000 (i) 88.00

* These savings are based on tax and NIC rates for 2016/17. Individual examples have been provided overleaf.

(i)NIC savings are proportionately lower for higher earners because the rate at which NIC is paid (and therefore saved under PensionsExchange) reduces to 2% for earnings over the NIC Upper Earnings Limit (£43,000 per annum for 2016/17). 

UCL also benefits from Pensions Exchange by paying lower employers National Insurance Contributions. These savings will be used to fund the increasing cost of pension provision which increases each year in line with UCL’s salary bill and also to enhance the working environment for staff.

Can I take part?

Any Member of the USS or SAUL pension schemes who will be no worse off as a result of taking part in PensionsExchange will be automatically included in PensionsExchange from the commencement of their employment. However as PensionsExchange is an entirely voluntary arrangement, if you wish to not participate you can choose to opt out by contacting Pension Services and requesting an opt out form.

There are a few limited circumstances where PensionsExchange will be unfavourable for UCL staff. If you fall into one of these limited circumstances, you do not need to take any action as you will be notified separately, and will not be included in PensionsExchange.

 What if I opt out or leave the scheme?

If you leave UCL and/or USS or SAUL with two or more years’ qualifying service, there will be no change to benefit options of deferred pension or a transfer value to another registered pension arrangement.

If you leave with less than two years’ qualifying service you have similar options (a deferred pension or a transfer value) as above. Pension scheme rules normally permit a refund of contributions as an option where the member leaves with less than two years qualifying service, but this will not be possible under PensionsExchange as the amounts exchanged are not member contributions.

If you withdraw from the USS or SAUL within three months of being automatically enrolled into pension scheme membership, membership of PensionsExchange will terminate immediately and your contractual salary will revert to its pre-PensionsExchange value. UCL will ensure that no employee is disadvantaged in these circumstances.

How does PensionsExchange work?

SAUL: Example 1

The example below highlights the pre and post PensionsExchange position of an employee earning £18,000 per year and contributing £1,080 (6% of Pensionable Salary) per year into SAUL.  Under PensionsExchange the employee’s ‘Reference Salary’ remains at £18,000 although the Adjusted Salary becomes £16,920.

Pre PensionsExchange Post PensionsExchange
Basic Salary £18,000.00 Reference Salary £18,000.00
Less Pension
Contributions
(£1,080.00) Less PensionsExchange Adjustment (£1,080.00)
Adjusted Salary £16,920.00
Less Income Tax (£1184.00) Less Income Tax (£1,184.00)
Less NIC (£1,192.32) Less NIC (£1,062.72)
Net Take Home  Pay £14,543.68 Net Take Home Pay £14,673.28

The employee’s net take-home pay has increased by £129.60 per annum from £14,543.68 to £14,673.28 and the total contributions to SAUL have remained the same.

USS: Example 2

The example below highlights the pre and post PensionsExchange position of an employee earning £33,000 per year and contributing £2,640 (8% of Pensionable Salary) per year into USS. Under PensionsExchange the employee’s ‘Reference Salary’ remains at £33,000 although the Adjusted Salary becomes £30,360.00

Pre PensionsExchange

Post PensionsExchange

Basic Salary £33,000.00 Reference Salary £33,000.00
Less Pension Contributions (£2,640.00) Less PensionsExchange Adjustment (£2,640.00)
Adjusted Salary £30,360.00
Less Income Tax (£3,872.00) Less Income Tax (£3,872.00)
Less NIC (£2,992.32) Less NIC (£2,675.52)
Net Take Home  Pay £23,495.68 Net Take Home Pay £23,812.48

The employee’s net take-home pay has increased by £316.80 per annum from £23,495.68 to £23,812.48 and the total contributions to USS have remained the same.

Note: All savings illustrated are based on tax and NIC rates for 2016/17.

Can I take part?

Any Member of the USS or SAUL pension schemes who will be no worse off as a result of taking part in PensionsExchange will be automatically included in PensionsExchange from the commencement of their employment. However as PensionsExchange is an entirely voluntary arrangement, if you wish to not participate you can choose to opt out by contacting Pension Services and requesting an opt out form.

There are a few limited circumstances where PensionsExchange will be unfavourable for UCL staff. If you fall into one of these limited circumstances, you do not need to take any action as you will be notified separately, and will not be included in PensionsExchange.