Announcement: Change to the minimum contributions to your pension

Do you need to do anything?

Please read this announcement carefully as it may affect you financially.
Provided you are happy for the minimum Employee contributions described on this Announcement Page below to proceed, you need take no action at all.

Should you not wish to do so, you will have no alternative other than to opt-out of the Scheme.  In this instance, please read the section below about how to opt-out as soon as possible, otherwise the extra contribution described herein will automatically be invested from your pay to your pension with effect from April 2019 by law.

The Background

As many of you will be aware, Currencycloud has always been pro-active in taking on its Government pensions auto-enrolment duties for its Staff.  The new pension scheme was established with Royal London to open up pension opportunities for those that did not wish, or were unable, to invest the higher standard amount of 3% into our existing pension scheme.  The Company contributed 50% greater than the 2% minimum contributions permitted, this being 3% of your basic salary.

The Company also decided to design its pension scheme in such a way as to save National Insurance for all Staff (this is, for basic rate taxpayers, a whopping 12.0% of every contribution you make) and for you also to receive the saving in its own Employers’ National Insurance, which it invests into your pension fund alongside your contributions – worth another 13.8% on top of every amount that you invest from your own pay.

Currencycloud increasing its contributions

The auto-enrolment rules are set by the Government and implemented by The Pensions Regulator.  These involved a gradual increase over three time-frames to all UK minimum pension contributions.

As mentioned above, Currencycloud is keen to provide Staff with as much help with these rules as budgets can allow and with effect from your April 2019 pay, your Board has decided to increase the company minimum contribution from the 3% current level referred to above, to a new 5% level.  Your own minimum contribution now rises from 2% to 3% of your basic pay.

This is extremely good value to you as an investment because you make great tax savings in addition to the Currencycloud contributions going to your pension fund.

For basic rate taxpayers your tax relief and resulting total contributions invested are very much in your interests and works as follows:

Example of £75 from your monthly pay:

A contribution rate of 3%, after allowing for the lower taxes you pay, actually costs you just 2.04% of your pay.

The above calculation is proportionately accurate for basic rate taxpayers.

It also shows that the equivalent growth on your own after tax cost is a huge 312.45%!  This is because you have a cost to you of just £51.00 for a total amount invested into your pension fund of £210.35 in the above table.

Thus, in principal, it is absolutely the case that investing into your pension makes sense for you and your Family’s financial future: there is nowhere better to invest for your retirement.  The Government knows this and that’s a key reason why Auto-enrolment was introduced.

New minimum pension contributions for you

The new contribution rates have increased the total minimum contributions to 8%.  This is an increase of 3% from the current minimum contributions to the pension scheme at present and your share of this increase is just 1%, the valuable tax reliefs outlined above lowering that even further.

Although it has not been mandatory by law, Currencycloud has already been investing double the amount of your own minimum to date and has decided now to share with you the additional burden this Government increase in raising its own minimum contributions to your pension from 2% to 3% of your salary – again, not mandatory for it to do so.

This is clearly a further commitment from the Company that it wishes to provide a lead for all of its Staff, recognising the huge value in making provision for your retirement.  As your Scheme Advisers at Patterson-Mills say at their presentations: most of us will actually retire.

For those of you not already investing more than the minimum contributions, you will now also need to contribute 3% as a new minimum with effect from their April 2019 pay.  This means that there are now three options for April 2019 payroll onward:

1. Accept automatic contributions being deducted from pay of the new minimum 2% with effect from April’s pay and receive the increased 5% from the Company.  For this, you need do nothing, or,
2. Take this opportunity to increase your contributions over and above this, or,
3. Opt-out of the pension scheme

It is very important to understand that, for those that do wish to “opt-out” of the pension scheme to avoid personal contributions, the Company will also no longer contribute to your Royal London Fund in the Scheme.  Your Royal London Fund itself would remain invested and still under the investment advice service from Patterson-Mills that Currencycloud also pays for on your behalf and you would be able to re-join the contributory side to the Scheme at any time in the future.

Those not already in the pension scheme

The Company operates a standard 3-month statutory postponement period for its Auto-enrolment obligations.  This means that if you were not on the Currencycloud February 2018 payroll, your personal automatic enrolment to the Currencycloud company pension scheme will happen with the May 2019 payroll.  Therefore, this Notice still may apply to you if you have not already made your contributions decision with our Advisers at Patterson-Mills, except that it is from the month following the Government rule change.

If you have already opted-out of the Scheme, you will find the minimum contributions will affect you only upon the tri-ennial automatic re-enrolment that all UK employers are obliged to undertake at the relevant time.  You would be informed about this directly by email as and when the occasion arises.

How to opt-out

Your Employer is not permitted by law to discuss opting-out of your company pension scheme and so you would need to contact ralitsa@pattersonmills.com by email in the first instance.  Ralitsa will inform you how to electronically opt-out of the Scheme with a link to the relevant Royal London web-page, which can only be done by you.  You are currently able to opt-out at any time afterward in respect of future payroll periods.

Why investing into your pension is such a good idea

Although both the Government and your Employer (as well as Patterson-Mills!) believe that it is certainly a good idea to remain a member of your company pension scheme – and the financial incentive is clear above – at this time, you cannot be forced to agree to make extra contributions, or even to increase your payments to 2%.

The table below summarises the minimum contributions changes referred to above.

As always, if you have any queries regarding the above, please don’t hesitate to get in touch confidentially with Sarah in HR or indeed Chris or Edward at Patterson-Mills (who can be reached by email to chris@pattersonmills.com and edward@pattersonmills.com).
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