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Voluntary Salary Cap

See what you can do to manage the amount of tax you pay if you’re over the salary threshold

What is the Voluntary Salary Cap?

If you’re getting close to your Lifetime Allowance (LTA) or Annual Allowance (AA) limits and you earn over the salary threshold, you could use a Voluntary Salary Cap (VSC) to help manage the amount of tax you pay on the benefits you build up and on your salary. But if you use VSC, you’ll build fewer USS benefits.

How does it work?

If you’re a USS member paying in and earning over the salary threshold, you can set your VSC anywhere between the salary threshold and your pensionable salary.

You’ll pay the same contribution rate but neither you nor your employer will pay contributions above your VSC to your Investment Builder pot. But if you still want your life cover and ill health benefits to be based on your full salary, you can pay 2.5% of your salary above your VSC. We call this Enhanced Opt Out (EOO). Otherwise these benefits will be based on your VSC.

Setting a higher VSC will use up more of your Annual Allowance – but you’ll also build up a bigger Investment Builder pot.

It could be appropriate for you to set your VSC above the salary threshold. We recommend that you get financial advice to decide what VSC is right for your personal circumstances. You can find a financial adviser at unbiased.co.uk. They may charge for advice.

Applying for VSC

You’ll need to speak to your employer because they’ll have to change their payroll.

You must apply by 3 March – and your VSC will start from 1 April. If you miss the deadline or join USS after 3 March, the earliest we can apply your VSC is the following April.

Need a hand?

To find out how different VSCs could affect you, give our Annual Allowance Modeller a go.

If you’d like to speak to someone about your tax liability and want to know whether a VSC is right for you, please speak to a financial adviser. You can find one at unbiased.co.uk. They may charge for advice.

Got a question?

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