LTB 532/18 – Post Office: Collective Agreement – Salary Exchange for Pension Contributions
No. 532/2018
19th September 2018
Dear Colleagues
POST OFFICE: COLLECTIVE AGREEMENT – SALARY EXCHANGE FOR PENSION CONTRIBUTIONS
I am pleased to advise Branches and members we have concluded a Collective Agreement with the Post Office for the introduction of Salary Exchange for pension contributions which the Postal Executive has unanimously endorsed today.
Principles of Salary Exchange and Who will Benefit
The Salary Exchange scheme commences from 1st November 2018 and provides benefits to all eligible members in respect of reduced National Insurance (NI) contributions. The Post Office also saves via lower employer NI contributions; we have therefore agreed with the Post Office to capture a significant proportion of the employer’s savings by recycling this money into the Defined Contribution (DC) pension scheme. The Post Office will pay more into the pension scheme, specifically by increasing contributions to the lower tiers. This will primarily benefit members employed from April 2008 who were in the original DC scheme which everyone would accept was inferior in comparison to the Defined Benefit (DB) scheme.
Employers’ Savings Used for Increased Contribution Rates
The introduction of this Agreement ensures members will benefit not just from the savings they make in NI contributions, but also, for those on the lower tiers, by virtue of enhanced pension arrangements via the introduction of revised pension contribution rates for both employer and employee as detailed below:
| Current contribution rates: | Contribution Rates From 1st November |
| 3% employee and 7% employer | 5% employee and 9% employer |
| 4% employee and 8% employer | 5% employee and 9% employer |
| 5% employee and 9% employer | 6% employee and 10% employer |
| 6% employee and 10% employer | No change |
| 7% or more employee and 11% employer | No change |
*Employees can increase their pension contribution rates at any time and benefit from employer contributions of up to 11% if they contribute 7% or more.
Ultimately it is an individual’s decision to embrace Salary Exchange or not, and by the same token to accept the position of increasing their pension contribution. However it is clear scheme members currently paying 3%, 4% and 5% and receiving 7%, 8% and 9% of employer contributions respectively will receive a greater pension benefit going forward providing they do not opt out of increasing contributions. It should be noted that c.50% of current pension scheme members would benefit from increased employer contributions.
Obviously it is good news the Post Office is prepared to pay greater pension contributions. Whilst we are asking some of our members to do likewise, it has to be advantageous to everyone concerned to be saving towards a better pension for their future. Consequently we plan to encourage members to embrace the benefits described above via both Salary Exchange and increased pension contributions.
Whilst we are advocating members on the lower pension contribution tiers will pay more money into the pension scheme, they will at the same time benefit by paying less NI monies (an average of £138 p.a. per member – this is a Post Office figure based upon all scheme members including Unite grades) which will help towards any increased pension costs. Obviously exact amounts will vary across individuals depending on their basic pay.
Attached to this LTB are following documents:
- Collective Agreement – Salary Exchange
- Joint Statement
- A jointly agreed booklet entitled “Salary Exchange for your pension” containing a comprehensive set of Q&As
It should be noted there are two variations of a letter being sent to members’ home addresses later this week from the Post Office. One of these letters specifically applies to a minority of individuals where applying Salary Exchange would not be of benefit to them due to being below the pay protection limit. This is explained in the attached booklet. Primarily this applies to part-time members on low hours whose overall pay would fall below the national minimum wage or national living wage. However, those members not eligible for Salary Exchange and therefore not benefiting from reduced NI contributions will however be advanced to the higher pension contribution rates and will benefit from the employer paying a higher contribution. This still leaves c.90% of employees who will gain through paying reduced NI. The two letters will include a contact telephone number and an email address for any queries.
Finally, we have worked constructively with the Post Office to conclude this Collective Agreement. However, whilst this is a step in the right direction, the introduction of a new Collective Defined Contribution (CDC) pension scheme comparable to that agreed in principle with Royal Mail remains our primary objective. To this end, further discussions are being held with the Post Office later this month. Further developments will be reported.
Yours sincerely
Andy Furey
Assistant Secretary
Attachment 1 – Collective Agreement – Salary Exchange
Attachment 2 – Joint Statement
Attachment 3 – Salary Exchange for your Pension