CPPIB Cash in Lieu Allowance Guide

Example – Member A Impacted by the LTA

• Member A has an annual base salary of £150,000 and has accrued a large pension value. Member A previously applied for Fixed Protection 2016 to safeguard a higher LTA. • The employer contribution rate is 10% of pensionable earnings. Pensionable earnings are defined as an individual’s a nnual base salary plus their in-year incentive award up to a maximum of 50% of their basic salary. • Member A selects the LTA CIL allowance (instead of standard pension membership). This results in the following: ➢ Pre-deduction CIL allowance of £15,000 per year (£150,000 x 10%). ➢ Corporate National Insurance (NI) is not payable on pension. It is, however, payable on this type of allowance payment (i.e. cash payment). ➢ Consequently, this needs to be deducted from the CIL allowance as follows: (£15,000/113.8%) = £13,181.02. ➢ This CIL allowance of £13,181.02 per year (£1,098.42 per month) is added to Member A’s pay from April. This CIL allowance will be subject to income tax and personal National Insurance in the same way as salary. ➢ Member A also receives a single CIL based on the annual in-year incentive award. Pre deduction, this is £7,500 (£75,000 x 10%). ➢ After the deduction of the corporate NI, the payroll CIL allowance becomes £6,590.51 (£7,500/113.8%). Again, this will be subject to income tax and personal National Insurance.

• CPPIB continues to provide the same level of contributions, just in the form of CIL instead of pension contributions.

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