Hampshire Pension Fund “What about my pension?” A presentation to staff Phil Villiers Pensions Communications Officer Pensions Services

Government proposals for reforming the Local Government Pension Scheme (LGPS) This presentation reflects the current structure of the LGPS The Government is currently reviewing public sector pension provision, which will lead to changes to the LGPS in the future. At this stage we are unable to advise what changes will be made and when. However, the latest Government proposals include the following: –Member contributions To increase, particularly for higher earners? –Retirement age To fall in line with state retirement age eg 66 from 2020? –Pension calculation Change from 60ths to……..? Switch to ‘career average’? Will only apply to future service We will advise you as soon as any changes are announced.

Summary Scheme overview “What if I’m made redundant? I’m under 55” –Deferred benefits “What if I’m made redundant? I’m over 55” –Immediate pension benefits Remaining in service –Reducing hours –Flexible retirement –Re-deployment Where can I get more information?

Scheme overview Final salary (currently!) Pension/tax free lump sum –Pre-April 2008 service: 80ths pension + 3/80ths tax-free lump sum –Post-April 2008 service: 60ths pension –Option to give up some pension to increase tax-free lump sum Normal retirement age 65 Leaving service before age 65: –Can retire early from age 55 Employer consent needed for retirement below age 60 Benefits reduced for early payment – unless –protected under ’85-year rule’ –leaving on account of redundancy –If not retiring, ‘deferred benefit’ paid at age 65 See our website for more details (

“What if I’m made redundant? I’m under 55” Deferred benefits – no special terms leaving benefits built-up in scheme, based on –final pay and –completed membership –at date of leaving payable from age 65 deferred benefits are ‘index-linked’ from date of leaving to retirement they can be paid from age 60 –but will be reduced if 85-year rule not satisfied they can be transferred to another scheme before retirement –eg new employer’s scheme, personal pension can use ‘non-statutory’ redundancy pay to increase deferred pension See our website for more details under past member

“What if I’m made redundant? I’m under 55” Deferred benefits – example Employee aged under 55: Leaving on 31 March 2012 Final pay of £20, years completed membership Deferred benefits – payable from age 65: Pension: –Pre-April 2008: 1/80 x 16 years x £20,000 = £ 4, per year –Post-April 2008: 1/60 x 4 years x £20,000 = £ 1, per year –Total pension £ 5, per year* Tax-free lump sum: –Pre-April 2008: 3/80 x 16 years x £20,000 = £12,000.00* * these benefits will be –‘index-linked’ from date of leaving to retirement –reduced if paid from age 60, unless protected under 85-year rule.

“What if I’m made redundant? I’m over 55” Retirement on enhanced benefits Immediate payment of benefits built-up in scheme –pension plus tax-free lump sum –option to give up some pension for more tax-free lump sum Based on –final pay and completed membership at date of leaving No reduction for early payment You cannot take deferred benefits instead – if you’re over 55 you must draw immediate benefits!

“What if I’m made redundant? I’m over 55” Immediate retirement benefits – example Employee aged over 55: Leaving on 31 March 2012 Final pay of £20, years completed membership Retirement benefits – payable immediately: Pension: –Pre-April 2008: 1/80 x 16 years x £20,000 = £ 4, per year –Post-April 2008: 1/60 x 4 years x £20,000 = £ 1, per year –Total pension £ 5, per year Tax-free lump sum: –Pre-April 2008: 3/80 x 16 years x £20,000 = £ 12, Employee can give up some of the pension to increase the tax-free lump sum (£12 lump sum per £1 pension given up)

“What if I’m made redundant? I’m over 55” Retirement on enhanced benefits Additional contributions –cease at date of leaving –Added years Option available to pay remaining contributions in contract –ARCs No option to pay remaining contributions in contract Reduced benefit paid, based on contributions paid to date of leaving –AVCs Fund used to increase pension and/or tax-free lump sum Redundancy payment –Option to use non-statutory element of redundancy payment to increase pension –‘Ready reckoner’ available

“What if I’m made redundant? I’m over 55” Retirement on enhanced benefits Pension in payment –subject to income tax, not N.I. –pensions increases annual review in April based on annual increase in Consumer Prices Index (‘CPI’) at previous September –may be ‘abated’ if you are subsequently employed by an employer that participates in the LGPS: your LGPS pension will be reduced (‘abated’) if your new annual pay + LGPS pension exceeds your pay when you retired. example on next slide

“What if I’m made redundant? I’m over 55” ‘The abatement rule’ – an example: You retire from LGPS –Rate of pay upon retirement£ 20,000 per year –LGPS pension, after any ‘commutation’£ 5,000 per year You get a new job with an LGPS employer –New rate of pay£ 16,000 per year –Add LGPS pension£ 5,000 per year –New pay + LGPS pension£ 21,000 per year Abatement: –New pay + LGPS pension£ 21,000 –Less rate of pay upon retirement £(20,000) –Pension will be reduced by£ 1,000 –Revised ‘abated’ LGPS pension£ 4,000 per year For more details see our website: ‘Got a question A-Z’ -> (R)e-employment

Remaining in service – reducing working hours Pension benefits are linked to ‘Whole-time equivalent’ membership and ‘Whole-time equivalent’ final pay So if you reduce your working hours your completed period of membership is not reduced your future ‘part-time’ membership will be converted to a ‘whole-time equivalent’ period at retirement, all your benefits are linked to your ‘whole-time equivalent’ final pay For more details see our website: –Got a question A-Z –(P)art time working/membership

Remaining in service – reducing working hours Example Employee reduces working hours from 1 April 2012 age 61 at 31 March years whole-time completed membership whole-time pay = £18,000 a year reduces hours to 18½ hours a week (50% whole-time) Part-time pay = £9,000 a year Retires at 65 in 2016 last year’s part-time pay = £10,000 Membership/final pay at age 65: Total membership at 65: –20 years plus 2 years (4 years x 50%) =22 years Final pay at 65: –(10,000 x 2) =£20,000

Remaining in service – flexible retirement Available if over 55 With employer consent, –drawing benefits early and –continuing working on reduced hours/lower grade* –*level of reduction included in employer discretionary policy Retirement benefits payable: –as if leaving service voluntarily and retiring with employer consent, –so reduced for early payment, unless 85-year rule applies ‘Abatement rule’ does NOT apply on flexible retirement Can continue paying into LGPS to build up additional benefit

Remaining in service - re-deployment Remain in same job with pay freeze or reduction: Remain in current membership: –On leaving service, alternative final pay definitions may apply: Best of the last 3 years Average of best 3 consecutive years in the last 10 If employer allows, defer existing membership: –cease existing membership and defer benefits –re-join scheme for future service. May not be best course of action – several factors to be considered For more details see our website: –Got a question A-Z –(R)eduction in pay

Where can I get more information? ‘Any questions?’ Employee guide Website: Pensions Services: Tel You can find details of local independent financial advisers at