CONTRIBUTIONS
Core contributions
You and the Company pay monthly contributions into DC Choice. You must pay a basic contribution of either 4% or 5% of your Pensionable pay (your basic four-weekly pay) and the Company will pay a matching credit of 1.5 times your contribution. In other words, for every £1 you pay in, the Company will pay another £1.50 on top.
| You pay | The Company pays | Total amount paid into your personal account |
|---|---|---|
| 4% | 6% | 10% |
| 5% | 7.5% | 12.5% |
It costs less than you think
The great news is you don’t have to pay income tax on your pension contributions, which means your contributions might not cost you as much as you think. If you’re a basic rate (20%) taxpayer, every £1 you contribute into DC Choice actually costs you just 80p. If you’re a higher rate (40%) taxpayer, every £1 you contribute into DC Choice costs you just 60p.
Your contributions are normally paid via Salary Sacrifice. In this way, your salary is effectively reduced by an amount that equals your contributions. It means you also make savings on National Insurance (NI) contributions, bringing the cost of contributing £1 down even further to around 67p (if you’re a basic rate taxpayer). Salary Sacrifice doesn’t affect any of your other benefits.
If you’d like to save more than 5%, you can pay Additional Voluntary Contributions (AVCs). These are a useful way of increasing your retirement savings. AVCs can be regular or one-off payments.
Your AVCs would be invested in the same way as your other contributions. However, unlike core contributions, the Company will not match any AVCs you make.
Find out more about contributions in the DC Choice employee guide.