Childcare vouchers and career average pension

[Spindelina]

Not sure whether to post this here, in employment, or in childcare. So trying here first.

I'm starting a new job soon, and joining a career average pension. If I ask for childcare vouchers, am I right in thinking the salary they are going to use to calculate my pension will be after the vouchers are taken off?

In which case, does anyone have a feel for whether I''m likely to be better off asking for vouchers or not?

(And I do realise two things - firstly I'm flipping lucky to be starting a new job with a defined benefit pension and secondly that I need to actually sit down with the numbers. But I thought I'd canvas opinion.)

Good question. DH has a final salary pension job - which may be about to change to a career-average job. So perhaps we'd better stop getting vouchers then too. Will keep an eye on the thread. Not really sure how to 'do the numbers' tbh.

It depends on the rules of the pension scheme: many base this on a 'notional salary' which includes amounts sacrificed for childcare vouchers or other benefits.

Ah, thank you MrAnchovy. DH is in the Teachers Pension Scheme. I shall have to look it up (for some reason DH can't quite manage this himself...)

After a bit of delving on the relevant website:

"Salary sacrifice arrangements have no effect on the salary used in any USS benefit calculations and the employer must continue to pay the full amount of pension contributions to USS based on the salary before any sacrifice is made"

So I think what MrAnchovy suggests is true in my case. Good, good.

Thanks!

I believe the Teachers Pension Scheme is based on the actual salary after sacrifice but do check as it may have changed. This scheme is based on the last 3 years pensionable pay so if you plan to stay in it until retirement its value is less likely to be affected.

RedRidingWolf

I 'think' that they would use his pay point salary rather than the the adjusted salary.

Years ago there was lots of fuss about teachers and childcare vouchers - teachers were not allowed to receive them because we have to be paid the same amount as our colleagues on the same pay point. We were not allowed to sacrifice our salary, and there were issues with pension contributions from the new lower salary.

Anyway, I believe our pay for pension purposes is taken from our pay point - (M5, U2 or whatever) - which is a defined amount. In addition, I understand that our pension contributions are linked to the pay point not to our gross salary after deductions (as I think they would be with other jobs).

It would make sense too - far easier to use defined amounts and look at the changing position on the payspine, rather than look at the actual amounts earned each year.

I am currently in the childcare voucher scheme but will be stopping taking them this month (we have a surplus and DH still gets them) so will see what effect that has on my contributions.

All the above is speculation but based on info I have read about the proposed pension scheme and the issues with childcare vouchers a while back (I am a teacher by the way :) )

OP - if you are not a teacher or work for someone like the NHS which would have a clear and fixed pay scale, then this is probably utterly useless to you. Sorry!

Thanks Patsys I had a look at the Teachers pension documentation and it seems to agree with what you said. That's a relief. The childcare vouchers have been deducted from DH's pay, but still haven't appeared for us, so that's a bit annoying as well at the moment!

That's good to hear you think the same too - it's all pretty baffling!

Ah yes, I am a bit out of date - the TPS has used notional salary since 2006! Always best to check the specific documentation provided by your employer though.

Patsys I'll be working for a university, which does have the same fixed pay point model. Not sure if the scales are national (it's the first time I've worked for a university, coming form the NHS), but I'm pretty sure my pay for the purposes of 'career revaluing' is going to be before vouchers. Which is what I wanted to know!

So, if the TPS moves (as it looks like it will have to) from final-salary scheme to a career-average salary scheme, hopefully it will still be using this notional salary method.

Currently DH (also university staff) is paying 'double' contributions into the TPS, to make up missed years, so that he will have the right number of qualifying years for his final-salary pension. I am wondering whether - if there is a switch to career-average, then that will be wasted money.

I believe it would still be worth buying years (or at least no less worth it then it was before).

The new pension will still involve you getting a certain number of 80ths (or 60ths depending on when you joine the scheme) of your career average salary.

So if you work/contribute for 20 years, you get 20/80 of the career average (or so I am led to believe :) )

Yes, that makes sense Patsy, thank you.