Hampshire Pension Fund2009 pensions briefing
‘Your retirement choices’
Phil Villiers
Pensions Communications Officer
Hampshire County Council
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?
A very, very, quick scheme overview
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………..
Basis Lump sum Pension
1) Old basis: for information £18000 £6000 per year
2) New basis: takes all £ 9000 £7000 per yearpost 4/2008 as pension
3) New basis: gives up £750 £18000 £6250 per yearpost-4/2008 pension for lump sum
4) New basis: takes £33214 £4982 per yearmaximum 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 benefitsLump 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
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:• Email [email protected]• Tel 01962 845588