Compulsory Employee Benefits
PFP Wealth Planning
As a professional cricketer at a first-class County, you are provided with four key benefits, however, these will be impacted by new Government legislation on pension provision, which is known as auto enrolment.
1. Auto Enrolment – the Government has imposed a statutory duty on all employers to auto enrol their employees into a qualifying pension scheme. This will apply from the first day of employment with any particular first-class County and will then continue until you leave. There are two exceptions:
a. Opting-Out – you have the right within your first month of employment to opt-out of auto enrolment, which can be achieved by contacting our Advisers, the PFP Group. However, if you opt-out and you remain with that County, they have a duty to repeat the process three years later. If you move Counties, you will be treated as a new employee and immediately auto-enrolled.
b. Lifetime Allowance – if you have built up substantial pension funds (£1.5m by April 2014) it is likely that your Adviser will recommend that you cease all pension contributions to any arrangement. The ECB, PCA and PFP have agreed a particular process in this eventuality and you should ask your Adviser to contact PFP in the first instance.
c. Multiple Employers – do not forget that if you have more than one employer, each will have to auto enrol you at their Staging Date, which is likely to vary.
b. Pension Plan members are insured for a Death in Service pension of 25% of their salary, which is payable to their partner or spouse should they die in service.
c. Expression of Wish Form – the above two benefits are payable via the Trustees and it is important that you instruct them as to who you would like the benefits paid to. You do this via an Expression of Wish Form, which should be reviewed whenever your personal circumstances change. As the Form is held by your employer in your personnel file, should you change Counties, you will need to complete a new Form.
Payment is subject to full medical evidence.
a. Fund Choice – the most difficult task with a Pension Plan such as this is where to invest your contributions. The Plan provides a huge choice ranging from default lifestyle options that are automatically applied if you do not make a choice, to a large choice of funds and ultimately self-investment facilities, should you wish to go down that route. The charges that Legal & General apply to each fund vary, but the basic annual management charge is 0.11% and then a variable fund management charge is made in addition, depending on investment choice. Full details are on Legal & General’s website. In addition to the generic information provided by PFP, there is nothing to stop you from obtaining advice on your choice of funds. You just need to remember that as there is no commission, you are personally responsible for your Adviser’s remuneration.
b. Contributions – as mentioned above, membership is now compulsory and you are required to pay 5% of your basic salary, on which you receive tax relief. Your employer will then pay an amount equal to a further 10% of your basic salary to give a total of 15%. Employees who are subject to higher-rate tax will need to reclaim the difference between 20% and 40% in their self-assessment.
c. Retirement Age – most players who were members prior to 1 April 2006 have a protected retirement age of 40, but the Government has changed this for all new players since then to an earliest retirement age of 55.
d. Benefits on Retirement – when you elect to retire, you will have the option to take a tax-free cash sum of 25% of your funds if you so wish, with the remainder being used to buy a pension, which is then payable for your lifetime. More details of the legislation surrounding pensions are set out in the separate booklet produced by PFP.
The above is a summary of a very complex set of rules. Should you require any further information, please contact either the PCA or PFP.