Summary A very, very, quick scheme overview ‘Deal or no deal’ – your retirement choices Early retirement – ‘worth considering?’ Death-in service benefits - ‘to nominate or not to nominate’ ‘Please sir, can I have some more?’ – paying extra contributions ‘What should I do now?’ - some suggested action points Where can I get more information?
What it costs contributory………..and your employer pays too contributions attract tax relief – so you pay less tax! the scheme is ‘contracted out’ – so you pay less NI! What it provides final salary benefits pension and tax-free lump sum normal retirement at age 65, with early, flexible, and late retirement options ill-health pensions pensions increase in payment (‘index-linking’) death benefits
The building blocks - final salary, membership, pay, final pay Final salary benefits membership x fraction x final pay Membership years and days as a member includes service purchased by transfer from a previous scheme part-time/term-time service converted to a ‘whole-time equivalent’ Pay basic pay plus other contractual, taxable pay elements Final pay normally pay in last year before retirement ‘whole-time equivalent pay’ used for part-timer/term-timer
Your retirement choices Pre-April 2008 service: Automatic: 80ths pension + 3/80ths tax-free lump sum Post-April 2008 service: Introduction of ‘choice’: 60ths pension with no additional tax-free lump sum Option to give up pension for tax-free lump sum: –£12 lump sum per £1 pension –Maximum total lump sum of 25% x pension fund value
For example……….. Mr/Mrs Member joined scheme 1 April 1988 40 years’ whole-time membership –20 years pre-April 2008 –20 years post-April 2008 retires at 65 on 31 March 2028 final pay of £12000
For example……….. BasisLump sumPension 1)Old basis: for information £18000£6000 per year 2)New basis: takes all£ 9000£7000 per year post 4/2008 as pension 3)New basis: gives up £750 £18000£6250 per year post-4/2008 pension for lump sum 4)New basis: takes£33214£4982 per year maximum lump sum allowed
Early retirement: Factors to take into consideration Will my employer let me retire early? From age 60 – can retire without employer consent Below age 60 – need employer consent (additional cost!!) Will my pension be reduced? Yes – its based on completed membership, also Early payment reduction will apply, except…. …..‘85-year rule’ may apply to all/some of benefit if you joined before 1 October 2006 and your ‘age + service’ = 85 Special terms also apply on redundancy/efficiency/ill-health What about flexible retirement? Option to draw benefits early and continue working: –You need your employer’s consent…which is not guaranteed –You need to reduce your hours or go to a lower grade –You can re-join scheme and build up more pension
Death-in service benefits ‘to nominate or not to nominate’
Death-in service benefits Lump sum death grant 3 x final pay (not ‘whole-time equivalent’ for part-timer/term-timer) –Death grant ‘expression of wish’ form needs to be completed for this benefit –If ‘expression of wish’ form not received or ‘invalid’, death grant paid to estate Widow’s/widower’s/civil partner’s pension Automatically paid to legal spouse/civil partner –no ‘expression of wish’ form needed Nominated cohabiting partner’s pension Only paid if certain conditions satisfied: –special ‘nomination’ form completed –‘free to marry’ –2 year qualifying period –financial interdependent or fully dependent Children’s pensions Paid to ‘eligible children’ in addition to any widow’s, widower’s, civil partner’s or nominated cohabiting partner’s pension –no ‘expression of wish’ needed
‘Please sir, can I have some more?’ – paying extra contributions
Paying extra contributions Additional regular contributions (‘ARCs’) Buy pension, in multiples of £250 pa, payable from age 65 Choice of member pension only or with dependant pension on death Fixed monthly payment + choice of payment term On-line calculator on our web site Additional voluntary contributions (‘AVCs’) invested in funds managed by Zurich can pay up to 50% of pay can use fund to –buy extra pension or, –increase tax-free lump sum or –combination of both Both options Tax relief on contributions!
What should I do now? Some suggested action points
It’s never too early to think about your pension….but it can be too late! Pension v lump sum? Update death grant ‘expression of wish’? Nominate cohabiting partner for pension? ARCs or AVCs (or both!)? Independent financial advice? IFA Promotions at www.unbiased.co.uk
Where can I get more information? Come and speak to me afterwards! Employee guide Website:www.hants.gov.uk/finance/pensions Pensions Services: Emailpensions@hants.gov.uk Tel 01962 845588