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5.
WHAT WILL IT COST?
Member contributions
You will be required to contribute in order to participate in the Scheme. The current
contribution rate depends on the level of your earnings:
If you are a lower-rate taxpayer or if your pay is not subject to income tax, your
contribution rate is 7% of your Pensionable Pay.
If you are a higher-rate taxpayer, your contribution rate is 8.5% of your Pensionable Pay.
Although you are required to contribute to the cost of your pension benefits, there is a
financial incentive because you receive immediate income tax relief on your pension
contributions. Contributions are deducted from your gross earnings before income tax is
calculated. This means that if you are a basic rate tax payer and your current rate of tax is
20%, every £10 you contribute to the Scheme will only reduce your take home pay by £8.
For example, if your gross annual salary is £30,000 (£2,500 per month), your take-home pay
will look like this:
Pensionable Pay
£2,500
Less 7% pension contributions
(£175)
Salary after deduction of contributions
£2,325
Less income tax on £2,325
*
(£
288308
)
Less National Insurance Contributions
(£
198218
)
Net take-home pay
£1,
839799
* Assumes a personal tax-free allowance of £
10,60011,500
for the 201
75
/201
86
tax year and no
other allowances.
All figures have been rounded to the nearest pound.
Your membership of the Scheme gives the GFTU authority to deduct your contributions from
your salary.
Additional Voluntary Contributions (AVCs)
You can choose to pay Additional Voluntary Contributions (AVCs) for additional benefits.
Payments can be made regularly by deducting them from your monthly salary, or if you want
to do so you can pay a lump sum AVC.