Questions and Answers

Overview of Salary Exchange

1. Why has the University of Oxford introduced Salary Exchange?

The USS changed its rules in 2007 and the OSPS in early 2008 to enable salary sacrifice in respect of employee pension contributions. The University of Oxford was keen to take advantage of this change, which allows employees to maximize their take-home pay by reducing their National Insurance Contributions (NICs). The University also benefits from reduced employer's NICs, which are returned to the employee's department in the form of reduced costs.

2. How does Salary Exchange work?

Salary Exchange is an implied consent scheme. This means that all USS and OSPS members are enrolled automatically in Salary Exchange unless they specifically choose to opt out. Enrollment in Salary Exchange will take place on or around three months after you join the University, USS or OSPS (whichever is the later).

(i)    Your employee pension contributions to USS or OSPS are reduced to nil.

(ii)    The University increases its employer pension contribution by an equivalent amount.

For members of both pension schemes the contribution is paid directly by the University into the appropriate scheme.

(iii)    Your basic salary and other pensionable pay elements are reduced by the current employee contribution rate, which represents the amount you used to pay into USS or OSPS. This revised salary (together with any non-pensionable pay to which you may be entitled) is known as your 'Adjusted Salary'.

(iv)    Your take-home pay increases because your NICs are reduced. The University makes NIC savings in the same way. These savings will be returned to your department in the form of reduced costs.

(v)    The overall level of contributions to USS or OSPS remains unchanged.

(vi)    Your level of pension is not affected. The pension you draw on retirement will be unchanged.

(vii)    Pay rises, overtime payments, etc are not affected.

(viii)    Additional Voluntary Contributions (AVCs) are not currently part of Salary Exchange; you may make any AVCs over and above the 'standard' level of pension contribution but the AVCs will not benefit from the savings in National Insurance.

(ix)    Your full Pensionable Salary is unchanged and you may continue to use this for all external purposes (for example, when quoting your salary for mortgage applications).

Impact of Salary Exchange

3. By how much will my take-home pay increase?

The increase in your take-home pay under Salary Exchange depends on your Pensionable Salary and the rate at which you pay NICs.

4. Will my Pensionable Salary remain the same?

Yes. Your Pensionable Salary is made up of your basic salary and, for some members, other pensionable pay elements. Under Salary Exchange, Pensionable Salary will continue to be calculated as the sum of your basic salary and any pensionable pay elements before the Salary Exchange reduction.

5. Will I still get the same pension at retirement?

Yes. Your pension at retirement is based on your years of service in USS and/or OSPS and your Pensionable Salary. Pensionable Salary is not affected by Salary Exchange; your pension benefits, therefore, will be unchanged.

6. If I participate in Salary Exchange, will it affect future pay increases or any other payments?

No. All future pay rises will continue to be based on your basic salary at its pre- Salary Exchange value. Similarly, all pay components which are derived from basic salary, such as overtime, will continue to be calculated on your pre-Salary Exchange basic salary.

7. I hold a joint appointment - how does Salary Exchange affect me?

For joint holders of joint appointments, the University will only operate Salary Exchange on the portion of your salary which is paid by the University. Further information is available in the document: Payroll SalEx Additional Information for holders of Joint Appointments (138kb)

8. What about Death in Service lump sum and benefits?

Death in service lump sum and benefits from USS remain unchanged as a result of Salary Exchange.

9. I pay National Insurance Contributions at the reduced married women's rate. Will I benefit from NIC savings if I participate in Salary Exchange?

Yes. Although you pay National Insurance Contributions at a reduced rate, you will still benefit from NIC savings by participating in Salary Exchange.

10. Is this a change to my terms and conditions?

No. Your contract of employment with the University should have included specific reference to Salary Exchange.

If you received an 'old-style' contract in the form used prior to May 2008 then you should also have received a letter informing you of the changes. If you received such a contract but did not receive a letter, or if you are uncertain about your contractual status in respect of Salary Exchange, then please contact your departmental administrator in the first instance.

11. How does Salary Exchange appear on my payslip?

Your payslip will include a specific line identifying the Salary Exchange deduction made against basic pay.

12. What happens if I ask for a reference for a mortgage or a loan?

The University will continue to advise lenders of the amount of your Pensionable Salary, which is unchanged by participation in Salary Exchange.

Participation in Salary Exchange

13. How do I participate in Salary Exchange?

Salary Exchange is an implied consent scheme. This means that all USS and OSPS members are enrolled automatically in Salary Exchange unless they specifically choose to opt out.

You do not need to complete any additional forms to participate. Enrolment in Salary Exchange will take place on or around three months after you join the University, USS or OSPS (whichever is the later), unless you fall into one of the following categories:

  • Participation in Salary Exchange would bring your Adjusted Salary (after the Salary Exchange reduction) to below the National Minimum Wage (which means you are not eligible to participate, as per HMRC guidance); or
  • Your Adjusted Salary after taking into account Salary Exchange would fall below the NIC Lower Earnings Limit. Please see the latest NI rates for more information on these limits.

If the University believes your Adjusted Salary is likely to fall below the NIC Lower Earnings Limit or National Minimum Wage, you will not be enrolled in the scheme and you will be contacted separately to confirm this.

14. I'm on a temporary University contract. How does Salary Exchange affect me?

If you are a USS or OSPS member, you will participate in Salary Exchange for the duration of your contract unless you specifically choose to opt out. When you leave the University's employment, your participation in Salary Exchange will come to an end automatically. If you transfer to another UK university, you will either be able to continue your membership of USS or opt to transfer your OSPS pension value into another scheme. Whether or not you can continue to take advantage of the NIC savings offered by Salary Exchange will depend on whether your new employer operates a similar scheme.

Please be aware that, if you are on a contract of less than two years, it may not be advantageous to you to participate in Salary Exchange.

Under the current arrangements, if you leave USS with less than two years of continuous service, you can choose between three options:

(i)    A deferred pension and lump sum which are payable when you retire, or

(ii)    A transfer value, if you elect to transfer your pension fund to another pension arrangement, or

(iii)    A refund of your personal pension contributions.

If you leave OSPS with less than two years of continuous service, you can choose either option (ii) or option (iii) from the list above.

Options (i) and (ii) are not affected by participating in Salary Exchange. Option (iii) is, however, because if you participate in Salary Exchange, you will not make any employee pension contributions. This means that if you leave USS or OSPS within two years, the value of any refund of contributions would either be greatly reduced or nil.

If you think that you may leave USS or OSPS within two years of joining, and that a refund of personal contributions would be your preferred option, participating in Salary Exchange may not be advantageous and you may wish to opt out. Please see question 22 (What happens if I leave USS or OSPS?) for further details.

15. I'm over the State retirement age and therefore don't pay National Insurance Contributions. How does this affect Salary Exchange?

If you are over the State retirement age you do not pay National Insurance Contributions (NICs) and so will not derive any personal benefits from Salary Exchange. The University, however, continues to pay NICs on your pay and so will benefit from your participation. The savings will be returned to your department as reduced costs.

16. What if I do not want to participate in Salary Exchange?

If you do not want to participate in Salary Exchange, you must complete an opt-out form and return it to the Payroll Department no later than two months after you join the University. If you have any difficulties downloading this form then please contact the Payroll Team, tel: 01865 (6)16301.

If you choose to opt out of Salary Exchange, you will still be able to participate in USS or OSPS and make pension contributions under opted out arrangements. Please note that, by opting out of Salary Exchange, you will not benefit from NIC savings and any resulting increase in take-home pay.

17. What if I opt out of Salary Exchange but then wish to opt back in?

If you decide to opt out of Salary Exchange, you will have the opportunity to elect to participate again with effect from 1 April of any subsequent year. Please use the opt-in form to inform us your intentions.

18. How does Salary Exchange affect my participation in other salary sacrifice schemes, such as childcare or bicycles?

Providing your Adjusted Salary is not reduced below the National Minimum Wage (£5.73 per hour) or NIC Lower Earnings Limit (see question 13 above), you will be enrolled automatically in Salary Exchange. The University will advise you if you are likely to be affected. If your circumstances change, however, and you believe your Adjusted Salary may fall below the National Minimum Wage, please contact the Payroll Team, tel: 01865 (6)16301.

19. Are there any circumstances where it may not be advantageous to participate?

It will not be advantageous for you to participate in Salary Exchange if any of the following apply to you:

  • Your earnings are close to the National Minimum Wage.
  • Your earnings are close to the NIC Lower Earnings Limit.
  • You plan to leave USS or OSPS within two years of joining and take a refund of personal pension contributions (see question 22, What happens if I leave USS or OSPS?).

If either of the first two categories apply to you, you will not be enrolled automatically in the scheme and you will be contacted separately to confirm this. If you have any questions, please contact the Payroll Team, tel: 01865 (6)16301.

Change in circumstances

20. What if I change my mind or my circumstances change?

By participating in Salary Exchange, you are agreeing to stay in the scheme until at least 31 March of the calendar year following that in which you join - e.g. if you join in July 2014 then you agree to participate until at least March 2015; if you join in February 2015 then you agree to participate until at least March 2016. Each March, depending on when you joined the scheme, you will be able to opt out with effect from 1 April if you no longer wish to participate. If this is the case, please complete and return to the Payroll Team an opt-out form before 31st March.

An exception will be made if you experience a 'life change event'. These include:

  • Commencing, or returning from, maternity leave, long-term parental leave, paternity leave or adoption leave;
  • Termination of your or your partner's employment;
  • Significant change of your or your partner's employment or hours of work;
  • Relocation - of either your home or your office;
  • Death of a close family member or dependant;
  • Marriage, divorce or legal separation;
  • Commencing, or returning from, long term sickness, or starting receipt of long-term disability benefit.

In these cases, and subject to the agreement of the University, you may opt in or out of Salary Exchange at a time other than the usual 1 April date. Should you wish to do so, please complete either an opt-in or opt-out form and return it at once to the Payroll Team.

21. What happens if I cease employment with the University of Oxford?

If you leave the University's employment, your participation in Salary Exchange will come to an end automatically. Contributions to USS or OSPS will also come to an end and you will become entitled to the appropriate pension scheme benefits, as described in question 22.

22. What happens if I leave USS or OSPS?

If you leave USS or OSPS for whatever reason, your participation in Salary Exchange will come to an end automatically. Contributions to USS or OSPS will also come to an end and you will become entitled to the appropriate pension scheme benefits as set out below for each scheme.

USS:

If you transfer to another employer participating in USS, you will be able to continue your membership of USS. Whether or not you can continue to take advantage of the NIC savings offered by Salary Exchange will depend on whether your new employer operates a similar salary exchange scheme.

If you rejoin USS within one month of leaving then the two periods of membership will be linked together. Otherwise, the two periods will be considered as two separate periods of membership.

If you leave USS and have two or more years of pensionable service in the scheme, you will have the choice of either:

(i)    A deferred pension and retirement lump sum which are payable when you retire; or

(ii)    A transfer value, available if you elect to transfer the value of your USS benefits to the scheme of a new employer or to a personal pension arrangement.

The benefits to which you are entitled will depend on your pensionable salary and your pensionable service in the scheme. Pensionable service will include any added service bought by, for example, a transfer of benefits from another pension scheme.

If you leave USS and have less than two years of pensionable service in the scheme, the options open to you will depend on whether or not you participate in Salary Exchange. If you participate in Salary Exchange you will have the same options as detailed above for staff with more than two years service. If you do not participate in Salary Exchange (or have participated for only part of the two year period) then you will also have the following option:

(iii)    A refund of your employee net contributions.

This third option is only available in full to staff who do not participate in Salary Exchange because under Salary Exchange, personal pension contributions are nil and so the value of any refund will also be nil. If you participate in Salary Exchange for part of the two year period, you will still receive a refund of those contributions made whilst opted out of Salary Exchange, but nothing for the period you participated in Salary Exchange. Under option (iii) you are refunded the value of personal pension contributions made during your period of service less statutory deductions.

If you think that you may leave USS within two years of joining, and that a refund of personal pension contributions would be your preferred option, participating in Salary Exchange may not be advantageous to you. In this instance, you may wish to opt out.

OSPS:

If you transfer to another employer participating in OSPS, you will be able to continue your membership of OSPS. Whether or not you can continue to take advantage of the NIC savings offered by Salary Exchange will depend on whether your new employer operates a similar salary exchange scheme.

If you leave OSPS to join the USS whilst still employed by the University, you can continue to take advantage of Salary Exchange.

If you rejoin OSPS within one month of leaving then the two periods of membership will be linked together. Otherwise, the two periods will be considered as two separate periods of membership.

If you leave OSPS and have two or more years of pensionable service in the scheme, you will have the choice of either:

(i)    A deferred pension and retirement lump sum which are payable when you retire; or

(ii)    A transfer value, available if you elect to transfer the value of your OSPS benefits to the scheme of a new employer or to a personal pension arrangement.

The benefits to which you are entitled will depend on your pensionable salary and your pensionable service in the scheme. Pensionable service will include any added service bought by, for example, a transfer of benefits from another pension scheme.

If you leave OSPS and have less than two years of pensionable service in the scheme, you will not be able to take option (i) whether or not you participate in Salary Exchange. Option (ii) is available to you irrespective of whether or not you participate in Salary Exchange. If you do not participate in Salary Exchange, however, (or have participated for only part of the two year period) then you will also have the following option:

(iii)    A refund of your employee net contributions.

This third option is only available in full to staff who do not participate in Salary Exchange because under Salary Exchange personal pension contributions are nil and so the value of any refund will also be nil. If you participate in Salary Exchange for part of the two year period, you will still receive a refund of those contributions made whilst opted out of Salary Exchange, but nothing for the period that you participated in Salary Exchange. Under option (iii) you are refunded the value of personal pension contributions made during your period of service less statutory deductions.

If you think that you may leave OSPS within two years of joining, and that a refund of personal pension contributions would be your preferred option, participating in Salary Exchange may not be advantageous to you. In this instance, you may wish to opt out.

23. What happens if I am made redundant?

The University will calculate any redundancy payment you are due on your Pensionable Salary, which will be unchanged by participation in Salary Exchange.

Entitlements and pay-related benefitsjavascript:;

24. Will Salary Exchange affect Maternity Pay?

The University of Oxford provides university maternity pay over and above Statutory Maternity Pay (SMP). Employees who have completed at least 26 weeks' continuous service with the University at the 15th week before the Expected Week of Childbirth are entitled to receive university maternity pay. This is 26 weeks at full pay including Statutory Maternity Pay (SMP), followed by 13 weeks at SMP only, followed by 13 weeks' unpaid leave.

Any university maternity pay you are eligible to receive will be based on your pre-Salary Exchange salary; you will be no worse off, therefore by participating. Unless you opt out of Salary Exchange under a life change event (see question 20 for details), you will continue to exchange an amount equivalent to 6.35% of your maternity pay during any period you are in receipt of university maternity pay. Overall your net maternity pay will not be adversely affected.

When you move onto SMP only (i.e. after the 26 weeks of university maternity pay) it is not possible to reduce statutory pay. SMP cannot be reduced under Salary Exchange. Consequently you will automatically be opted-out of Salary Exchange and normal pension contribution rules will apply.

25. Will Salary Exchange affect Sick Pay?

The University of Oxford provides sick pay over and above Statutory Sick Pay (SSP). University sick pay will still be calculated with reference to your pre-Salary Exchange basic salary and will therefore not be affected by participation in Salary Exchange. Unless you opt out of Salary Exchange under a life change event (see question 20 for details), you will continue to exchange an amount equivalent to 6.35% of your sick pay during any period you are in receipt of university sick pay.

If you are on SSP only, it is not possible to reduce statutory pay. SSP cannot be reduced under Salary Exchange. Consequently you will automatically be opted-out of Salary Exchange and normal pension contribution rules will apply.

26. Will Salary Exchange impact my Tax Credits?

No. Participation in Salary Exchange for Pension Contributions will not impact any HM Revenue & Customs Tax Credits.

Please note that payslips use the term 'Sal Ex' to refer to the University's other salary sacrifice schemes, including childcare and bicycles. Tax credits may be impacted by participation in the salary sacrifice scheme for childcare.

27. What about State benefits?

Both the USS and OSPS are currently contracted out of the State Earnings Related Pension Scheme (currently the State Second Pension, previously known as SERPS). This means that you currently earn a reduced state earnings related pension and USS provides this benefit instead. Salary Exchange has no negative impact, therefore, on your State Second Pension.

Most other State benefits will not be affected by participation in Salary Exchange, unless participation in the arrangement means that your Adjusted Salary is brought below the NIC Lower Earnings Limit (£4,940 per annum for 2008/09). In this situation, benefits that may be affected include basic state pension, job seeker's allowance, incapacity benefit, bereavement payment and allowance and widowed parent's allowance.

If the University believes that your Adjusted Salary is likely to fall below the NIC Lower Earnings Limit, we will assume that you do not wish to participate in Salary Exchange. In this case, you will not be automatically enrolled in the scheme and you will be contacted separately to confirm this.

28. Will Salary Exchange have any impact on my payments to the Child Maintenance Service (CMS)?

Child maintenance payments to the CMS are calculated with reference to your net income, i.e. your pay after the deduction of pension contributions, tax and NIC. Under Salary Exchange, your net income increases because you are paying less NIC. There will, however, be no increase to your child maintenance payments as the CMS will not typically change the amount of child maintenance if the change in net weekly income is less than 5%. Salary Exchange net pay changes will be less than 5%.

Contact details for the CSA and further details can be obtained from the CMS website.

29. Will my student loan repayments be affected?

If you are repaying a student loan taken out with the Student Loans Company, your student loan repayments may be reduced slightly and the repayment period may increase as a result of participating in Salary Exchange. This is because your repayments are calculated using your Adjusted Salary (after the Salary Exchange reduction).

30. What is the impact of Salary Exchange on a dependant's pension?

Salary Exchange has no impact on a dependant's pension.