Changes in pension arrangements: Reductions in take home pay in April 2016
14 April 2016
As a result of changes in pension arrangements the majority of UCL staff will see reductions in their take home pay in April 2016.
Changes to State Pension arrangements
Last year the Government announced changes to the state pension with the introduction of a New State Pension and an increase in National Insurance Contributions. These changes became effective from 6th April 2016 and will be reflected in this month's salary payments.
The New State Pension will replace the existing Basic and Second State Pension. Under the Government's changes, in the long term the New State Pension will be more beneficial to employees on retirement as the full New State Pension is greater than the combined Basic and Second State Pension. The maximum Basic State Pension before April 2016 was £119.30 a week with an Additional Pension entitlement if the Second State Pension applied. The maximum for the New State Pension is £155.65 a week. A guaranteed protected payment will apply if, under the old arrangements you had an entitlement to more than the New State Pension maximum. Further information can be found via this link.
The Government intends to pay for the increased cost of the New State Pension by no longer allowing employees who are members of an occupational pension scheme, such as the Universities Superannuation Scheme or the Superannuation Arrangements for the University of London, to pay a reduced rate of National Insurance Contribution. As a result, UCL employees who are members of the Universities Superannuation Scheme, the Superannuation Arrangements for the University of London, the National Health Service Pension Scheme or the Medical Research Council Pension Scheme, will see an increase in their National Insurance Contribution deduction from their April 2016 salary. This increase is 1.4% on monthly earnings between £676 & £3583.
Reforms to the Universities Superannuation Scheme
Members of the Universities Superannuation Scheme also will see changes to their pension scheme in April 2016 which were agreed last year by the employee and employer representatives. These changes still provide members with a defined benefit pension scheme though the employee contribution rate will be increasing from 7.5% to 8% for members of the final salary section and from 6.5% to 8% for members of the Careers Revalued Benefit section.
UCL HR Pension Services has produced 5 tables which illustrate the reduction in take home pay between March and April 2016 together with a Q&A for members of UCL's occupational pension schemes. The take home pay tables and the Q&A are available via the following UCL HR Pensions' website link.
Changes to the Universities Superannuation Scheme pension scheme can be located on the UCL HR Pensions' website via this link.
UCL Human Resources Division