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Update - Auto-enrolment levels will automatically increase in April 2019

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Update - Auto-enrolment levels will automatically increase in April 2019

Auto-enrolment is a Government led initiative where employers are required to automatically enrol employees into a Pension Plan. There are minimum contributions that have to be made by the employee and employer which must automatically increase over time. The final increase in the minimum level of contributions was due to take effect in 2018, however the Government has delayed this until April 2019.

 

Telefónica had planned accordingly to automatically increase the minimum employee contribution for Defined Contribution (DC, Section 1 members) from 2% to 3% and the minimum employer contribution from 4% to 6% at 1 January 2018. However, since the change in legislation, Telefónica has decided to postpone the final automatic increase to the minimum pension contributions until April 2019.

 

For ex-Defined Benefit (DB, ex-final salary, Section 1A) members of the Telefónica UK Pension Plan you receive a Pension Supplement (“the Supplement”) as a percentage of your pensionable pay. The current minimum auto-enrolment level is a 6% pension contribution into the Plan. This minimum contribution level increases was due to automatically increase to 9% in January 2018. However, this has now been delayed until April 2019 in line with the current legislation.

 

Regardless of your membership you can of course still increase your pension contributions sooner by visiting www.telefonicarewards.com, you can increase your pension contributions at any point. 

 

Do I need to take any action in April 2019 for the increase in pension contribution to take effect?

 

No, for DC members the change to your employee (2% to 3%) and employer contributions (3% to 6%) will automatically take effect in April 2019. If you take no action you will remain at your current level of employee (2%) and employer contribution (4%) until April 2019.

 

For Ex-DB members, the pension contribution percentage will automatically increase from 6% to 9% in April 2019. This will mean you will receive a corresponding reduction on the amount of Supplement you allocate to cash from 10% to 7% to maintain your overall Supplement of 16%. If you take no further action your allocation of Supplement to pension will remain at your current level of 6% until April 2019 where it will then automatically increase to 9%.

 

What happens if I want to remain at my current level of contributions after April 2019?

 

For DC members, remaining at 2% employee and 4% employer contributions will no longer be possible from April 2019 due to auto-enrolment legislation. The minimum Telefónica Pension Plan contributions table can be found below.

 

Time Period Employee Contribution (what you will pay) Employer Contribution (what Telefónica will pay) Total Contribution
1 April 2013 -   31 December 2016 1% 2% 3%
1 January 2017 - April 2019 2% 4% 6%
April 2019 - onwards 3% 6% 9%

 

 

For ex-DB members, as of April 2019 under the Telefónica UK Pension Plan it will no longer be possible to contribute less than 9% to your pension. The minimum level of contribution will automatically increase from 6% to 9%. The minimum Telefónica Pension Plan auto-enrolment contributions table can be found below.

 

 

Time Period Pension Supplement value % Minimum % allocated to Pension from Pension Supplement Remaining % of Pension Supplement paid as cash
1 April 2016 -  30 June 2016 21% 3% 18%
1 July 2016 - 1 December 2016 16% 3% 13%
1 January 2017 – April 2019 16% 6% 10%
April 2019 onwards 16% 9% 7%

 

If I’m a DC member of the Plan can I receive even more employer contributions towards my pension savings?

 

Yes, the April 2019 planned increase to 3% employee and 6% employer contributions will be the minimum contribution level required to be an actively contributing member of the Telefónica Pension Plan.

 

Remember, all Pension contributions are made before income tax is deducted from your pay, so a £1 investment into your Pension is even less than £1 of your take home pay. If you make your pension contributions through ‘salary exchange’ you also save on National Insurance Contributions.

 

It’s easy to take advantage of even greater employer contributions and you can increase your contributions at any point, simply visit: www.telefonicarewards.com. By increasing your contributions you can receive up to 11.5% of employer contributions. After all, there’s a reason why so many of your colleagues are members of the Telefónica Pension Plan.

 

If I’m an ex-DB member of the Plan can I contribute more than 9% into my pension?

 

Yes, the April 2019 planned increase to 9% is the minimum contribution required to remain an active member of the Plan. It’s easy to increase your contributions and you can do this at any point by visiting www.telefonicarewards.com. If you can allocate your entire 16% Supplement to the Plan however any additional employee contributions above 16% will not result in any additional employer contributions.

 

Will the minimum pension contributions I need to make into the Plan automatically increase again post April 2019?

 

There are no further Government requirements to increase the minimum level of contributions post April 2019, Telefónica doesn’t therefore plan to automatically increase contributions again unless there are future changes to legislation.

 

I no longer want to save for my retirement, how can I opt-out of the Telefónica Pension Plan?

 

Remember if you decide to opt-out of the Pension Plan all DC members will no longer receive any additional employer contributions towards your retirement and it’s unlikely you will be able to receive any refund of your employee contributions.

 

By opting-out all employees will no longer be eligible for our Income Protection scheme, regardless of whether you re-join the Plan in future. Depending on which section of the Plan you’re in there may also be an impact on your employer funded life assurance and dependants pension entitlement. For more details on the implications of opting out of the Plan please click here.

 

We hope you stay in the Plan but if you do decide you would like to stop making contributions then you can opt-out through www.telefonicarewards.com

 

Where can I find more information?

 

To read more information on auto-enrolment and how the future changing levels of contributions will impact you please click here to view the Telefónica Pensions website.

 

If this does not answer your question you can contact our Pension Plan Administrators Standard Life by clicking here. The above link will also allow you to find contact details for our benefit administrators Conduent who can assist with any questions relating to www.telefonicarewards.com or how you can increase your contributions.

 

The Telefónica Pensions Team

 

December 2017

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