1. Police Pension Scheme 2015
April 2015

2. Rachel Lamb Peninsula Pensions Devon County Council
Introduction
Wednesday
2015
Rachel Lamb Peninsula Pensions Devon County Council
Notes for speaker
Welcome to today’s presentation. My name is Rachel and I work for Devon County Council, Peninsula Pensions. We administer the Police Pension Schemes, the Firefighter Pension Schemes and the Local Government Pension Scheme.
For about an hour we will look at the changes introduced to the Polices Pension Scheme from 1 April 2015.

3. What will we look at today?
Background
Look at the 2015 Scheme
The facts
What has changed
What remains the same
How you may be affected
Protections
Notes for speaker
This presentation will look at the reasons for the change, cover the facts to help you understand what the changes mean for you, focusing particularly on key aspects of the scheme which have changed, what remains the same, how you may be affected and the different protections in place.

4. Scheme naming structure
Police ‘Old’ Scheme
1987 Scheme or PPS 1987
Police ‘New’ Scheme (NPPS)
2006 Scheme or PPS 2006
Police 2015 Scheme
2015 Scheme or PPS 2015
Notes for speaker
From April 2015 there will be 3 Police pension schemes running alongside each other.

5. Why is my scheme changing?
Hutton report published March 2011
People living longer
Increasing cost of pension provision
Recommendations for public sector pension reform:
Affordable
Sustainable
Fair
As a result, all public service schemes are being or have already been reformed.
Notes for speaker
Due to the high level of scrutiny surrounding public sector pensions, Lord Hutton was tasked by the Government to independently review all public sector Pension Schemes and make his recommendations.
In his report, published in 2011, Lord Hutton concluded that:
People are living longer and the cost of public sector pensions has increased by about one third
Most of this cost is met by the tax payer.
His recommendations for reform stated that public sector pension schemes should be affordable, sustainable and fair.
As a result, all public sector schemes are being or have already been reformed.

6. How do the changes affect you?
There are 3 membership categories
Fully Protected – Stay in current Scheme.
Tapered – Some protection – don’t start accruing ‘CARE 2015’ until a date determined by a tapered table.
No Protection – Benefits accrue in 2015 scheme from 1st April.
Speaker Notes:
These are the 3 membership categories and we will now look at these in more detail.

7. Group 1 – Fully Protected
Within 10 years of current Normal Pension Age (NPA) 55 as at 1st April PPS 1987 and NPPS 2006 members aged 45 or over as at 1st April 2012.
You are an active 1987 Scheme member and had 10 years or less to age 48 and were 10 years or less from a maximum unreduced pension as of 1 April 2012.
Remain in current scheme – No change!
Speaker Notes:
Why 1st April 2012? Reforms announced by ministers in 2012, that protections would be in place for 10 years from that point
Both PPS 1987 and NPPS 2006 have NPA age 55

8. Group 2 – Tapered Protection
Phased move to the PPS 2015
4 taper tables
Taper date depends on age for 1987 & 2006 members and service for 1987 members
Speaker notes
Further 4 years of tapered protection.
So members 10 – 14 years from current NPA at at 1st April 2012 have limited protection.
On average, for every month of age over the 10 years, member will gain about 53 days of protection.
The last day of protected service for any member benefitting from tapered protection will be 31 March 2022.
At the end of the member’s protected period they will be transferred to the 2015 scheme.
NB: Taper dates are mid month so pay for taper month will be manually adjusted to take account of different contribution rates etc

9. Taper Date Categories
in the 1987 Scheme and the 2006 Scheme who on 1 April 2012 were aged between 41 and 45 years;
in the 1987 Scheme who on 1 April 2012 were 10 years or less from being able to retire on maximum, unreduced pension and were aged between 34 and 38 years.
in the 1987 Scheme who on 1 April 2012 were aged 38 or over (up to age 45) and were between 14 and 10 years from being able to retire on a maximum, unreduced pension;
in the 1987 Scheme who on 1 April 2012 were aged less than 38 who are more than 10 years from being able to retire on a maximum, unreduced pension. This applies when your age minus the years from being able to retire on a maximum, unreduced pension, was between 24 and 28 years.
Taper tables available on Peninsula Pensions website and Home Office

10. Group 3 – No protection
All other members moved to the 2015 Scheme from 1st April 2015.

12. What type of scheme is PPS 2015?
Occupational
Un-Funded
Defined benefit
Benefits set out in law
One of several Public Service pension schemes
Notes for speaker
The PPS 2015 is, as PPS 1987 and PPS 2006:
An occupational pension scheme
Unfunded in that contributions are not invested in regional Pension Funds. The costs are met by the scheme member, the Police Authority and ultimately, the tax payer
Benefits are defined and set in law
One of several Public Sector Schemes, others include the Local Government Pension Scheme, Firefighters Pension Scheme, NHS Pension Scheme, Teachers Pension Scheme, etc.

13. The Facts – What’s new? Change from ‘Final Salary’ to ‘Career Average’
New ‘Accrual’ rate 1/55.3th
Individual Pension Accounts
New ‘Normal Pension Age’– 60
Deferred Pension Age equal to State Pension Age (with a minimum of age 65)
Notes for speaker
The 2015 scheme is a career average scheme from 1 April PPS 1987 and PPS 2006 are final salary schemes. PPS 2015 pensions will be worked out each scheme year, over the course of your career and revalued to ensure it keeps up with the cost of living
Every year in the new scheme you will get a pension that's equal to a 55.3th of your pay added to your pension account
We will look in more detail at how your pension is worked out and at the new pension account system later
The Normal Retirement Age for membership built up from 1 April 2015 is age 60
Your deferred pension age is equal to your State Pension Age, with a minimum of age 65
Members re-joining after a deferment of less than 5 years can link new service with previous service as if they had always been an active member

14. The Facts – What’s not changing?
Guaranteed defined benefit scheme
Tax free contributions
Option to take tax free cash lump sum
Index-linked pensions
Built in Ill-health benefits / life cover
Pension for dependants
Employer pays contributions
Notes for speaker
Staying an Active Member of the 2015 Scheme has a number of significant benefits, including:
 A public service pension remains one of the best available.
 Having a public service pension is a tax efficient and an effective way to save for your retirement.
 The 2015 Scheme will provide a guaranteed level of pension which is based on a fraction of your Pensionable Earnings for each Scheme Year (1/55.3) uprated each year until retirement
Upon retirement your earned pension is uprated by CPI in accordance with the Pensions (Increase) Act In a Defined Contribution Pension Scheme your pension would be of an unknown amount based on investment returns.
 In addition to your own contribution, your Police Pension Authority makes a significant contribution towards your pension.
 You receive tax relief on your pension contributions and until 6 April 2016 you also pay a lower rate of national insurance contribution as the 2015 Scheme

15. PPS 2015 summary Pension based on 1/55.3th of pay.
Normal Pension Age (NPA) of age 60 (no reduction).
The Normal Minimum Pension Age (NMPA) is 55.
You have the option to retire at any time after NMPA and to take immediate payment of your pension; if you decide to retire with immediate payment of your pension after NMPA and before NPA, your 2015 Scheme benefits will be actuarially reduced by reference to NPA.
Individual CARE Pension Account.
Active pension account revalued in line with Consumer Price Index (CPI) %.
Deferred and pensioner benefits revalued in line with Consumer Price Index (CPI).
Notes for Speaker
Pension in the active pension account will increase by the Consumer Price Index %
Deferred pensions or pensions in payment will increase by Consumer Price Index (CPI)
You may remain an Active Member of the 2015 Scheme as long as you wish (there is no maximum period of service). If you decide to continue in service
beyond NPA there will be an actuarial uplift applied to your pension as it will be paid later than it would be in normal circumstances.

16. PPS 2015 continued… Can buy Added Pension.
Can buy out Early Reduction if leave before NPA.
Commute pension to lump sum at rate of 12:1.
Ill Health cover.
Death in service benefits.
Family/Dependants benefits.
Notes for Speaker
We will cover in more detail later.

17. How does CARE work?
Each year the member builds up a slice of pension (1/55.3th) based on their salary in that year
Each slice is adjusted in line with the Consumer Price Index (CPI) % until retirement. This can be negative or positive.
At retirement, the slices built up each year are added together to calculate the total pension
Early retirement reductions applied if benefits are taken before age 60
Notes for speaker
A care scheme banks ‘slices’ of pension each year
Your pension builds up over your career to provide you with an income at retirement.
1/55.3th of your pensionable earnings is added to your pension at the end of the scheme year (31 March) The balance of your pension is carried forward to the next scheme year
Option to buy out the early payment reduction
If you have reached NMPA and you are entitled to claim your pension early and you are either an Active Member who has not reached NPA or a Deferred Member who has not reached your SPA, you may opt to buy out the Actuarial Reduction which would have otherwise applied in the calculation of your annual pension.
If you choose to do this, the payment to buy out the Actuarial Reduction may be made by you, your employer or shared between you and your employer.

18. Example: CARE Pension (Year 1)
Pension = 1/55.3th of your pay
Pensionable Earnings = £21,000
£21,000 ÷ 55.3 = £379.75
£ added to account on 31 March.
Plus uprate by CPI % e.g. 2% CPI % = 3.25%
£ (i.e of £379.75), added in April
£ Total pension earned in Year 1
Notes for Speaker
Consumer Price Index % for active members.
Pensions in payment and deferred pensions increase by CPI
Scheme year: 1st April – 31st March
In comparison:
The current accrual rate is 1/70th
£21,000 ÷ 70 = £300.00, with no other increases unless through a pay rise.

19. Example: CARE Pension (Year 2)
Opening balance £392.09
Year 2 accrued pension
£21,210 ÷ 55.3 = £383.54
Net pension
£ £ = £775.63
Closing Balance, Year 2
£ x = £800.84
Extra notes for speaker
The estimate assumes 2% CPI % each year.
No cap on the amount of pension you can earn in the 2015 scheme.
If you transfer across from the 1987 scheme you will not be limited to 30 years service.

20. How your pension builds up

21. New Contribution Rates
3 contribution rates / pay bands / tiers
Part time Police contribution based on whole time equivalent pay
Calculated as at 1 April, adjusted mid year on material change

22. Contribution Rates Salary bands PPS 1987 PPS 2006 PPS 2015 Tier 1
14.25%
11.00%
12.44%
Tier 2
12.05%
13.44%
Tier 3
15.05%
12.75%
13.78%
Tier 1 covers officers with full-time Pensionable Earnings at and below £27,000 per year;
Tier 2 covers officers with full-time Pensionable Earnings above £27,000 but below £60,000 per year
Tier 3 covers officers with full-time Pensionable Earnings at and above £60,000 per year
For example if you were a part timer whose whole time equivalent pay was between £21000 to £27000 you would pay 12.44% of your actual pensionable pay as contributions.
Members ineligible for ill-health retirement benefits
Tier %
Tier %
Tier %

23. Pensionable Pay/Earnings
Basic salary
London weighting
Increase in pay on temporary promotion
Temporary salary
Competency Related Threshold Payments
(the latter to be phased out by April 2016)
Allowances are not pensionable (Overtime pay, housing allowance and transitional rent allowance will not be pensionable)
Notes for speaker
Acting up allowance to be confirmed (under review)

24. Assumed Pensionable Pay (APP)
Any loss/reduction of pay due to:
reduced pay while on sick leave, paid adoption leave, paid maternity leave, paid parental leave, paid maternity support leave or paid adoption support leave;
receiving statutory pay;
absence from duty because of being called out, or recalled, for permanent service in Her Majesty’s armed forces in pursuance of a call-out notice served, or a call-out or recall order made, under the Reserve Forces Act 1996; or
pay during any period of ‘relevant service’ as defined under s.97 of the Police Act 1996 for which pension contributions have been paid ie international organisations / national crime squad/ national intelligence etc
NB: provided that you have not opted out of the 2015 Scheme during this period
APP equivalent to expected normal pay
Notes for Speaker
Assumed Pensionable Pay (APP) is used for the
calculation of earned pension in the absence of pensionable earnings
calculation of final pay
For any unpaid periods of maternity etc. member can elect to pay contributions
APP will also be added to the Pension Account for trade dispute where member has elected to pay the contributions

25. Assumed Pensionable Pay (APP)
Member can elect to pay contributions for any unpaid periods of:
Sickness / Injury (maximum 12 months)
Maternity / Adoption / Parental Leave
Member cannot elect to pay contributions for :
Reserve Forces special leave differs if during the period of service member has pensionable service in:
(a)an existing scheme that relates to the armed forces or another scheme under section 1 of the Act that relates to the armed forces; or
(b)any other occupational pension scheme.
Notes for Speaker
Assumed Pensionable Pay (APP) is used for the
calculation of earned pension in the absence of pensionable earnings
calculation of final pay
For any unpaid periods of maternity etc. member can elect to pay contributions
APP will also be added to the Pension Account for trade dispute where member has elected to pay the contributions

26. Added Pension Contributions
Additional pension can be purchased under the 2015 scheme in line with GAD guidance.
Purchasing added pension (where you can increase your pension by paying additional contributions) is currently limited to £6,500 per year. The limit may be altered by HM Treasury (HMT). Added pension is revalued by Consumer Price Index in line with the Pensions (Increase) Act 1971.
Scheme members with existing pre 2015 contracts will continue with that contract.
Speaker notes:
Added pension conts are revalued in line with CPI
Can be purchased for member only, or member and survivor (different costs)
Payable by periodical monthly payment or by lump sum payment (once contributed to 2015 or 12 months or over)

27. What about the benefits accrued pre 1 April 2015? (or pre taper date)
The pension that you have built up before you transfer to the 2015 scheme is fully protected and will be calculated on your final salary at retirement (if you stay in the 2015 scheme)
This will be paid in addition to the benefits earned under the 2015 scheme.
Extra speaker notes
No cap on the amount of pension you can earn in the 2015 scheme
If you transfer from the 1987 Scheme you will not be limited to 30 years service
Highlight the existing scheme benefits retain the final salary link
For the purposes of the Final Salary Link (used for calculating benefits under the 1987 Scheme or the 2006 Scheme), service under the 1987 Scheme or the 2006 Scheme will be taken to end when you began your gap in service. However, any 1987 Scheme or 2006 Scheme benefits will remain linked to your final Pensionable Earnings in your new scheme if you rejoin and the gap in service does not exceed 5 years.
If you are returning to the police force after a gap in service (this does not include a career break) not exceeding 5 years, you may be able to accrue future benefits in the 2015 Scheme.
If you once again become an Active Member of the 2015 Scheme after a gap in service not exceeding 5 years your 2015 Scheme pension will be revalued as if during the gap in service you were an Active Member (i.e. revalued in line with CPI+1.25% per year) but as if you received no Pensionable Earnings.

28. Your retirement benefits
Includes:
New CARE Scheme pension
Previous Final Salary pension
Any transferred in membership
Any commuted lump sum

29. When can I retire? Normal Pension Age (NPA) – 60.
Age 60+ you can immediately take 2015 benefits.
Retiring before NPA – 2015 benefits will be reduced.
Benefits accrued in 1987 & 2006 schemes retain existing NPA for benefits accrued under those schemes.
If you meet current scheme eligibility to retire, you can receive existing scheme benefits.
Notes for speaker
The Public Service Pensions Act 2013 gained royal assent and set the normal pension age for Police Officers at 60
If retiring before NPA the 2015 benefits will be reduced.
Benefits accrued in 1987 & 2006 schemes retain existing NPA for benefits accrued under those schemes
For example, a 1987 Scheme member could retire early at 55, take their 1987 benefits and elect to defer their 2015 benefits. The 2015 benefits would be deferred until the member’s State Pension Age (minimum of age 65), then paid without reduction. Or the member could take the 2015 benefits early, with reduction.
NPA Scheme 30 yrs service, age 50 with 25 yrs + service, or at Compulsory Retirement Age – 55
NPA Scheme is age 55

30. Scheme Flexibility ~ Buying out Reduction
Option to buy out the early payment reduction
If you have reached NMPA (55) and you are entitled to claim your pension early and you are either an Active Member who has not reached NPA or a Deferred Member who has not reached your SPA, you may opt to buy out the Actuarial Reduction which would have otherwise applied in the calculation of your annual pension.
If you choose to do this, the payment to buy out the Actuarial Reduction may be made by you, your employer or shared between you and your employer.
Speaker notes:
Could be used by employer– discretionary for each police force
The cost of buying out the early payment reduction will be determined by the Police Pension Authority in accordance with actuarial guidance.

31. Double Accrual Guarantee
Recognises the expectation to double accrual for members in the ‘old’ 1987 Police scheme.
The formula: N x R/Q
Pro Rata’s the expected accrual – weighted accrual formula
Speaker notes:
Promised recognition for members expectation for double accrual for service accrued under the 1987 scheme
Will apply in all circumstances at point of calculation including annual allowance calculations

32. Double Accrual Guarantee Formula
N x R/Q x Final Salary
N = The accrual that the officer would have built up had they remained in the 1987 scheme until end of their service, and full time throughout. Includes 1987 and 2015 service (maximum 40/60)
R = 1987 service – 1987 actual pensionable service up to 31 March 2015, or taper date (maximum 30 years)
Q = Calendar Years service in 1987 & 2015 (max 30 years)
Speaker notes:
A – Capped to reflect existing limits
B – Capped at 30 years

33. An example .... N x R/Q PPS 1987 by comparison
N = 30/60 (max 60ths if no change)
R = 16 years in 1987 scheme (upto 31/3/15 or taper date)
Q = 25 (total calendar year PPS 1987 & 2015)
FS = £20000
(30 ÷ 60) x (16 ÷ 25) x £20,000 = £6,400
PPS 1987 by comparison
(£20,000 ÷ 60) x 16 = £
Speaker Notes:
PPS 1987 without double accrual; guarantee would be
£20,000 ÷ 60 X 16 = £5,333.33
So a gain of £1, under the new arrangements

34. Options for Lump Sum Optional lump sum at retirement.
Up to 25% of pension can be commuted.
Subject to HMRC limits
£12 for every £1 commuted.
Speaker notes:

35. Lump Sum Options - 1987 Scheme
Can commute ¼ of pension into lump sum.
Pension converted using age related commutation factors. Or
Lump sum to not exceed 2 ¼ x pension (for those members with 25 years service after age 50)
Speaker notes:
Commutation options in 1987 scheme;
Can commute ¼ x commutation factor related to age Or
Lump to not exceed 2 ¼ x pension (for those with 25 years service after age 50)

36. Tax Charges on Lump Sums
Commutation factors introduced for members retiring after 20 April 2011, brought about potential tax charges for members with a commutation factor higher than 20:1.
This commutation factor meant the value of the commuted lump sum exceeded the maximum permitted by HMRC (currently set at 25% of total value of vested benefits).
Lump sums subject to a 40% tax charge for the element of lump sum in excess of the 25% limit.

37. Deferred Benefits
Benefits deferred if member leaves before entitlement to immediate payment.
Normal Pension Age is individual’s State Pension Age (minimum of age 65.)
Can be taken early from age 55 with reduction (with buy out option relating to reduction).
Can be paid on Ill Health grounds if you have become permanently medically unfit for any regular employment
Speaker notes
Ill health from Deferred – application made to employer, medical criteria must be met, Employer discretion.
Permanently medically unfit for any regular employment – this being employment of an annual average of 30 hours per week

38. Ill Health Retirement - Protection
Protected members will continue to have full provisions for ill health as per the scheme they are a member of at 31st March 2015, i.e ‘old’ or ‘new’ schemes.
Tapered members will be subject to ill health rules of the scheme they were a member of at the 31st March 2015 up until their tapered protection date.
Speaker notes
For example, a member with a taper date of 29th December 2016, who retires due to ill health on 16th August 2015, will retire under their existing scheme rules.

39. Ill Health Retirement - Enhancement
Lower tier ill health
Benefits will be calculated based on the amount of your accrued pension at the time of your ill-health retirement. There will be no reduction for early payment and no enhancement.
Higher tier ill health
Enhancement based on formula:
Speaker notes
All protected members will have full provision for ill health as per the scheme they are a member of at 31st March 2015 i.e. their existing scheme
Ill health can be reviewed if fitness for work is proven

40. Ill Health Retirement – Other
Members who;
Do not have protection, or
Protection has expired, or
Previous membership of the 1987 or 2006 Scheme without transitional protection due to opting out.
Will have ill health upper tier enhancement calculated in accordance with the 2015 Scheme.
Accrued benefits in their previous scheme will form part of the lower tier pension.
Speaker Notes
Protection has expired (e.g. taper date was 29th December 2016 but ill health retirement is 15th January 2017)

41. Death Benefits Death in Service lump sum 3 x FINAL PAY
Death on pension Death gratuity – estate
If you die as a Pensioner Member within 2 years of becoming a Pensioner Member, then your estate may be granted a gratuity. If, when you die, the various benefits payable under the 2015 Scheme (excluding the lump sum death grant) are less than the total of your own pension contributions, an extra benefit equal to the balance of those contributions will be paid to your estate.
Speaker notes:
Nominations can be made on transfer to 2015 scheme
Meaning of “final pay”
159.—(1) In these Regulations, “final pay” in relation to a continuous period of pensionable service under this scheme (“period of service”) means the greater of the following amounts—
(a)the amount of a member’s pensionable earnings payable in respect of the 12 months ending with the last day of pensionable service;
(b)the amount of a member’s pensionable earnings payable in respect of any scheme year in the 10 scheme years immediately before the last active scheme year (“the earnings year”).
the amount in paragraph (1)(b) is adjusted for inflation in accordance with paragraph (3).
(3) The amount of pensionable earnings payable in respect of the earnings year is adjusted for inflation by increasing it by the same amount as that by which the annual rate of a pension of an amount equal to the amount of pensionable earnings would have been increased under PIA 1971 by the day following the last day of pensionable service if—
(a)that pension was eligible to be so increased; and
(b)the beginning date for that pension was the first day of the next scheme year after the earnings year.

42. Pensions for Survivors
Spouse*
Civil Partner*
Co-habiting partner*
Conditions apply
Wide age disparity clause
Children's pension
For any eligible children
*payable for life
Speaker notes
Spouse includes same sex marriage partner and cohabiting partner.
Conditions, assessed at time of death:
Free to marry
Financially inter dependant
Long term relationship
Spouses pension
Death of Active – ½ higher tier ill health pension
Death of Deferred – ½ deferred pension
Death of Pensioner – ½ pension in payment at date of death plus Pensions Increase, ignore any reductions.
Wide Age Disparity
If spouse more than 12 years younger pension reduced
An eligible child is;
 a child who is your natural child, stepchild or adopted child, and
 any other child who was substantially dependent on you (either financially or by reason of disability) at the time of your death.
Benefits for eligible children are payable to a posthumous child if the child’s mother is pregnant with the child at the time of your death, including the situation where you are the mother and you die in childbirth.

43. Cost Cap Scheme designed within cost parameters.
2% above or below may result in scheme changes.
Normal Pension Age subject to regular review.
Valuation in future years will be done to assess if costs as expected.
Speaker notes:
Any changes will be negotiated with members and unions etc
As part of Reform Design Framework, Government has said there is a 25 year ‘guarantee’ of no change. Cost controls in place could result in changes to accrual rates/contribution rates etc.

44. Transfers to Money Purchase
From 6th April 2015 no transfers will be allowed from unfunded public service schemes into defined contribution arrangements.
Speaker notes:
Transfers into defined contribution schemes will no longer be allowed from 6th April 2015.
Please note you will need to also inform deferred members.

45. Questions? www.peninsulapensions.org.uk Speaker notes:
FAQs should be available on Home Office/Peninsula Pensions website

46. Disclaimer
The information contained in these slides are the authors interpretation of the current regulations.
The information is subject to change due to various factors including, but not limited to, changes to rules and regulations introduced by the Government Actuary's Department, HMRC and/or the Home Office. Changes can happen at short notice and may be implemented prior to the Council issuing any future revised documentation.
Readers should take their own legal / financial advice on the interpretation of any particular piece of legislation.
No responsibility whatsoever will be assumed by Peninsula Pensions for any direct or consequential loss, financial or otherwise, damage or inconvenience, or any other obligation or liability incurred by readers relying on information contained in these slides.
Speaker Notes: