Hampshire Pension Fund 2009 pensions briefing ‘Your retirement choices’

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

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

‘Deal or no deal’ Your retirement choices

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 – worth considering?

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 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

‘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

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