Agenda item

Salary Sacrifice Schemes

Minutes:

The Head of HR and Organisational Development submitted a report that proposed the implementation of three new salary sacrifice schemes, for a workplace nursery, Additional Voluntary Contributions and lease cars, which would allow employees to save on tax and National Insurance.  A revised copy of the Pay Policy Statement was attached to the report at Appendix 1.

Workplace Nursery – The provider had estimated that 90% of Kennet Day Nursery users who were employees of the Council would use the salary sacrifice scheme.  The management fee for the Council would be 2% of the annual childcare fee paid by all users of the nursery, the fee would be paid for two years, the cost of which would be taken from the Employer’s National Insurance contributions savings which would be made by the Council.  At the end of two years, the Council would retain all savings that had been made.  As an indicative figure, this meant that the fee would be around £19k for two years and the saving to the Council would be around £130k for two years based on current usage, from which the management fee would be taken.

Additional Voluntary Contributions (AVCs) – Paying AVCs through salary sacrifice would allow employees to add more money to their pensions by not paying National Insurance contributions on the amount sacrificed and the savings of tax and National Insurance would be used to make additional contributions to an employee’s individual pension pot.  The provider expected an average take up rate of 5% of existing LGPS members.  The management fee would be 4% per year for three years, the cost of which would be taken from the Employer’s National Insurance savings made by the Council.  At the end of the three years the Council would retain all the National Insurance savings.  As an indicative figure this meant that the total management fee for three years would be around £45k, with the savings to the Council being around £189k for three years from which the management fee would be taken.  The Council’s Statement of Policy about Exercise of Discretionary Functions under the Local Government Pension Scheme would need to be amended to allow it to pay a contribution where an employee had elected to pay an AVC by salary sacrifice.

Lease Cars – Under this scheme the employer would lease the car from the provider and the employee would enter into a three year agreement to lease the car from the Council.  The monthly cost would depend on the value of the car.  Cars would be available for the employee without the need to provide a deposit and no credit check would be made.  However, employees would be provided with a full breakdown of the monthly cost by the provider so that they could check affordability.  In addition, salary could not be sacrificed to a level below the national minimum wage.  The provider had estimated that around 2% of employees would use the scheme.  The saving on National Insurance contributions would depend on the employee’s choice of car, but an ‘average’ car could result in £688.29 National Insurance saving each year or £51,622 per annum, if 2% of employees used the scheme.

Resolved –

(1)     That the introduction of salary sacrifice schemes for a workplace nursery, Additional Voluntary Contributions (AVCs) and lease cars be agreed;

(2)     That the amendment of the Council’s Discretions Policy to allow the Council to pay shared cost Additional Voluntary Contributions where an employee has elected to pay AVCs by salary sacrifice be approved.

 

Supporting documents: