Contributions and tax
Paying into a pension is not just about how much you contribute. Your enrolment letter will help you find out how much you and the Company will contribute, and if those contributions will increase in the future. If you pay tax, you will also get tax relief from the Government on anything you pay in. All of this means that it’s easier than you think to build up your pension savings.
The table below shows the Company and Member Contribution rates.
You wish to pay
The company will pay
Total payment
5%
5%
10%
6%
6%
12%
7%
10%
17%
8% or more
14%
22%
Please take a look at our Reviewing Your Pension Contributions video and State Pension Changes leaflet.
Your contributions will be deducted in two different ways, these are known as ‘SMART’ and ‘Non-SMART’.
Non-SMART
Each month, the Company will take regular contributions from your salary before tax and pass them on to L&G, along with any additional amount that they’re paying in for you. This means that if you pay tax, you benefit from the full tax relief straight away. Contributions will be paid across as Member Contributions.
SMART
After three months of paying into the Scheme, the Company will start to take regular contribution from your salary by ‘SMART’ (sometimes called salary sacrifice). This will only happen if you are earning above the Pay Protection Limit and paying National Insurance. This means that your contribution is taken from your pay before tax, and paid as Company contribution – this way you benefit from full tax relief and save on National Insurance straight away,
If you are eligible, this will happen automatically. Use the SMART calculator to see how you could benefit.
To help you understand this works in more detail, take a look at the SMART Pensions guide. Remember, you can choose to opt out of this if you do not wish for this to happen. To do this you need to complete the SMART Pensions opt out form.
Tax limits
When you’re thinking of how much to contribute, you should bear in mind that there is a limited amount you can pay without incurring a tax charge.
Generally, you can pay in the equivalent of your entire annual salary each year (or up to £3,600 if this is more) and get tax relief. However, the Government has put in place an annual allowance which includes any money that you pay in and any money that an employer pays in on your behalf, to this Scheme or any other pension arrangement you may have. If you exceed the annual allowance you will pay tax on any amount paid above it.
HM Revenue and Customs (HMRC) provides a helpful tool to work out whether you may be affected by the annual allowance. For high earners, the government has introduced tapered annual allowance. This means your annual allowance will start reducing once your yearly income exceeds £240,000 (yearly income comprises your and your employer’s pension contributions and any other taxable income, for example salary, dividends, rental income). You can find out more about the annual allowance by visiting the Gov.uk website.
If you have any questions about annual allowance and what it means for you, you can call our specialist helpline on 0345 070 2983.
These allowances can change with each new tax year, depending on what the Government sets out. The Legal & General Tax Year Rates and Allowances booklet will keep you up to date on what these allowances are, and how they could affect you. Alternatively you can look at the Kingfisher Pension Tax Changes Guide.
Can I contribute more into the Scheme?
Yes in addition to increasing your Member Contributions, provided the Trustee agrees, you can choose to pay Additional Voluntary Contributions (AVCs) as a fixed monetary amount or can make single one-off contributions. Your AVCs will not be matched by the Company. Your AVCs are added to your pension savings and invested in the same way as your other contributions.
You can contribute as much as you like towards your pension whether in the Kingfisher Pension Scheme or any other registered pension scheme but there is a limit to the tax relief available (see the ‘Tax limits’ section above).
You can change or increase your contributions at any time. You can do this by logging in to Manage Your Account and completing the online Change of Contributions Form. Alternatively, you can download the form and send it to your payroll department.
