UK Pensions
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What is the Wood Pension Plan and the Auto Section?
Wood believes it is important to focus on what happens after you finish work, and wants to help you take responsibility for putting money away now, so that you can afford the things you need when you no longer have a salary coming in. The Wood Pension Plan is a pension plan that helps you save for retirement. It has been designed with a number of important things in mind.
Auto Section is a section of the Wood Pension Plan set up to deal with UK Government Pension legislation on automatic enrolment into workplace pension schemes.
Focus on joining
UK Government Pension legislation mean you may be automatically entered into the Auto Section. You will receive a joiner letter showing the date on which you became a member. You can opt out if you don’t want to be a member. If you remain a member, the Auto Section helps you save for your retirement.
What is auto enrolment?
As a result of UK Government Pension legislation, employers must automatically enter workers who meet certain criteria into a workplace pension scheme. This process is called ‘auto enrolment’.
If you are not already a member of the main section of the Wood Pension Plan, you may be enrolled into the Auto Section, a separate auto-enrolment section of the Plan.
How do I know whether I will be affected?
If you are already a member of the main section of the Wood Pension Plan, auto-enrolment has no effect on you and you will remain a member of the Plan. If you are not eligible to join or have chosen not to join the main section of the Plan, then:
- If you earn £10,000 a year or more (£833.33 a month or £192.31 a week) and you are between age 22 and State Pension Age – you will be automatically entered into the Auto Section.
- If you earn less than £10,000 a year, or you are under age 22 or over State Pension Age, you will not be automatically entered into the Auto Section, but you can choose to join if you want to do so. If you wish to join, complete and return an application form. Forms are
available on request from the Pensions Team using the details shown on the back page. UK Government Pension legislation aim to get everyone off to a good start
When will I be enrolled?
You will receive a letter informing you of your enrolment into the Auto Section when this happens. This letter will tell you the date on which your enrolment takes effect.
Can I opt out?
Yes, you can choose to opt out if you don’t want to be a member of the Auto Section. If you opt out within one month of your enrolment date, you will receive a refund of any contributions you have made (or that have been made on your behalf). Please note that if you opt out and you remain an employee of Wood, you may be re-enrolled into the Auto Section in three years’ time, due to UK Government Pension legislation.
Contribution rates
You pay contributions of 5% of your qualifying earnings**, and Wood also contributes 3%. You can pay more than 5% if you wish, but Wood will not pay any more than 3%. You can change your contribution rate at anytime by submitting a Contribution Amendment Form to the Pensions Team. Forms are available on the pensions portal.
The more you pay into your Retirement Account, the higher your benefits are likely to be when you retire. If you’re a long way from retirement you might feel that your pension is not a priority – but paying more when you’re younger could really boost your benefits because your contributions will be invested for longer.
* The actual cost to you will be less than this because you receive tax relief and NI savings.
**Qualifying Earnings are set by the Government each year, further information on Auto-enrolment including the Qualifying Earnings thresholds can be found at MoneyHelper.com.
It costs you less than you think
This is because you receive tax relief on your pension contributions. If you are a 20% taxpayer, every £1 you contribute costs you just 80p. If you are a higher rate taxpayer, every £1 you contribute costs just 60p. If you contribute via SMART Pensions you also pay less National Insurance contributions.
For example
Thomas joins the Auto Section with qualifying earnings of £18,000 and pays contributions of 5%. Wood contributes 3%, giving a total contribution of 8% or £79.12 a month into his Retirement Account. The cost to Thomas is less than this:
| Tax Example | Example Cost |
|---|---|
| Thomas’ contribution (5% of his qualifying earnings) | £75.00 a month |
| Less tax relief | £15.00 |
| Less National Insurance saving | £9.00 |
| Actual cost to Thomas | £51.00 a month |
Focus on the cost
- You pay contributions of 5% of your qualifying earnings*.
- Wood will contribute 3% to help your Retirement Account grow.
- If you wish, you can pay contributions above 5%.
- The higher your contribution rate, the faster your Retirement Account is likely to grow (dependent on investment returns).
- Your contributions can be paid via salary exchange called SMART Pensions which means that you make National Insurance savings.
- You receive tax relief on your pension contributions.
*Qualifying earnings is defined as:
Gross earnings between £6,240 and £50,000 pa (2020/21)
Salary Exchange – SMART Pensions
Your contributions are normally paid via a salary exchange arrangement called SMART Pensions. SMART Pensions is simply a more effective way of paying into the Auto Section, because you and Wood both make National Insurance savings.
SMART Pensions does not affect the amount of benefits you receive from the Plan, or any other pay-related benefits you may have. This is because your ‘notional’ (pre-exchange) pay is used for calculating such benefits.
You can choose to opt out of SMART Pensions if you wish. However, because we expect almost all members to benefit, you will be included in SMART Pensions automatically unless you tell us you wish to opt out. There are a few members who will not benefit from SMART Pensions, for example, those who are close to certain tax thresholds. These members will automatically be removed from SMART Pensions and will contribute via the traditional payroll deduction method.
How does SMART Pensions work?
- Instead of you paying contributions to the Plan, your contractual basic pay is reduced by the amount you wish to pay in pension contributions.
- Wood then pays these contributions on your behalf, as well as its own contributions to your Retirement Account.
- As a result of this you pay less in National Insurance contributions because your pay is reduced. We will still keep a record of your pay before the reduction. We will call this your ‘basic pay’ and it will be used to calculate all pay related benefits such as bonuses. Your death in service benefits will not be affected by participating in SMART Pensions.