Contribution structure
Your pension contributions and those made by the Company are paid into a Trust Fund, which is quite separate from the Company’s assets. The Trust Fund is invested by independent managers appointed by the Trustee.
Members (other than 'reduced accrual' members) pay 10% of Contribution Earnings. Your contributions are deducted from your earnings before income tax is assessed, which means you receive full tax relief on your contributions.
Contribution Earnings means total gross monetary earnings above the Lower Earnings Limit (LEL) – generally excluding bonus payments, cash received instead of a non-cash benefit and payment in lieu of notice. If you work part time, a proportion of the LEL will be applied.
Prior to April 2016 the Scheme was contracted-out of the State Second Pension (S2P) and you would have paid lower National Insurance (NI) contributions. However, following changes introduced by the government, the Scheme is now contracted in and you will therefore be paying full NI contributions.
Example:
Your Contribution Earnings are £31,200 per year or £2,600 per month or £600 per week. From this figure, first deduct the LEL, currently £533 per month or £123 per week (correct for the 2023/24 tax year)
Monthly: £2,600 - £533 = £2,067
Weekly: £600 - £123 = £477
Your contribution is 10% of Contribution Earnings - i.e. £206.70 per month or £47.70 per week. If you are a basic rate taxpayer, the contributions attract tax relief at 20% so the net cost to you is actually £206.70 - £41.34 = £165.36 per month or £47.70 - £9.54 = £38.16 per week.
Company contributions
The Company pays the balance of the cost needed to provide the benefits under the Scheme, which is calculated by the Scheme’s independent Actuary.
Can I pay more?
Tax relief is granted on all pension contributions up to your personal Annual Allowance (AA). The standard AA for 2023/24 is £60,000 but depending on your taxable income, this may be tapered down to a minimum of £10,000. Please click here to see the Taxation section for more information on how to calculate your personal AA. For more information on Additional Voluntary Contributions (AVCs) please click here.
Can I pay contributions to other schemes?
Yes. You can contribute to a personal pension and/or Stakeholder pension arrangement while you are a contributing member of the ABF Pension Scheme, although Company contributions will only be made to the ABF Scheme. You will need to check your total Annual Allowance usage as your Annual Benefit Statement will only provide details for your ABF pension. To find out more information on tax limits, please click here.
What do reduced accrual members pay?
Reduced accrual members pay 7% of their Contribution Earnings over the LEL. In exchange for the lower contribution, they accrue benefits at 1/80th of the Final Pensionable Earnings less 1/80th of the LEL.
How are contributions calculated for part time workers?
For part time workers, the same proportion of the Lower Earnings Limit is deducted from your Contribution Earnings as the proportion of your part time hours worked compared with the full time rate. So, if you work 50% of full time, the Lower Earnings Limit that is deducted will be 50% of your Contribution Earnings. You then pay the same 10% as all other members.