- Pension basics
- Scheme benefits
Normal retirement age
Jane retires with a Final Pensionable Pay of £25,000 and an accrual rate of 1/60 after completing 30 years' pensionable service. Her pension is calculated as follows:
1/60 x £25,000 x 30 = £12,500 a year
If you've ever worked part-time, your final pensionable pay will be the full-time equivalent but your Pensionable Service will be pro-rated for that period.
Jane retires with a Final Pensionable Pay of £9,000 after 10 years' pensionable service working 35 hours per week (full-time) followed by 12 years' pensionable service working 20 hours per week (part-time).
Corresponding full-time salary: £9,000 x 35 (full-time hours) / 20 (part-time hours) = £15,750
Pension: 1/60 x £15,750 x 10 (full-time hours) = £2,625 a year
Plus: 1/60 x £15,750 x 12 x 20 (part-time hours) / 35 (full-time hours) = £1,800 a year
Total pension: £4,425 a year
You may be able to take up to 25% of the value of your pension as tax-free cash. This will reduce your annual pension but any spouse's pension payable on your death won't be affected.
You may also have the option of taking up to 25% of your pension, at retirement, as tax-free cash. The amount you take must be within the Lifetime Allowance (LTA).
If you choose to take a cash lump sum, your annual pension will be reduced. However, taking cash from the Scheme will not reduce the amount of any spouse's pension payable on your death after taking benefits.
Did you know that the Group offers a Flexible Pension Option? This allows you to start taking your pension from age 55 (age 57 from 6 April 2028) and still continue to work. The amount you can take is subject to certain statutory minimum benefit requirements set by the government. If you’re interested in taking flexible retirement, you can request a quotation from your Scheme administrator.
Deciding whether or not to participate in the Flexible Pension Option is a major decision, so if you're thinking about this it's important that you get independent financial advice.
Normal retirement age in the Scheme is 60. However, in most cases you can take your deferred pension from age 50, subject to Group consent.
Your pension will be calculated based on your pensionable salary and pensionable service at your actual date of retirement. In addition, your pension will be reduced because it's likely to be paid for longer than if you'd retired at your normal retirement age.
Some members will retain the right to retire from age 50, depending on the Scheme rules and when they joined the Scheme.
Whatever your Scheme, you won’t be able to take flexible retirement before age 55 (age 57 from 6 April 2028).
You have a right to work past your normal retirement age and continue to build up pensionable service.
You'll continue to be a member of the Scheme if you're ill and have to take time off work. If you've completed at least five years’ pensionable service and can’t carry on working because of ill-health, the Group may decide to give you your pension immediately. It'll take independent medical advice and consider things like the severity of your illness and if you’re likely to be able to return to work in the future.
This pension would be based on your final pensionable salary and pensionable service at the date of retirement. The Group also has the discretion to increase the number of years of pensionable service to the maximum you would have completed if you'd retired at normal retirement age.
After you retire, your pension will increase on 1 April each year. You can find out more in the pensioner section.
From April 2015 members of Defined Contribution (DC) schemes can choose to take as much cash from their pension savings as they like (although only 25% can be tax-free). In addition, once members reach retirement their pension savings can be taken gradually rather than all in one go.
At the moment members of Defined Benefit (DB) schemes aren't able to use their pension savings in this way without transferring them to a DC scheme.
Before 6 April 2016, the State Pension was made up of the Basic State Pension (BSP) and the State Second Pension (S2P). From 6 April 2016, this was replaced by a new flat-rate State Pension.
Before 6 April 2016
This pension was payable in addition to your pension from the Scheme. The amount of the Basic State Pension depended on your history of National Insurance contributions.
All members of the Group's Defined Benefit (DB) pension schemes under State Pension age were contracted out of the S2P on a salary-related basis. This means that instead of receiving this additional state benefit, benefits for members and their spouses must broadly match or be better than what they would have received from the S2P.
If you're a member of one of the Group's DB Schemes, and you built up pension before 5 April 1997, your pension from the Scheme includes an element of Guaranteed Minimum Pension (GMP).
For pension built up from 6 April 1997 onwards, the Actuary had to certify that the Scheme had passed the 'reference scheme' test in order for it to be allowed to continue.
After 6 April 2016
The BSP and the S2P has now been replaced by the new State Pension. This is a single tier system. This means that members who were contracted out, and paid a lower rate of National Insurance contributions as a consequence, now pay the full National Insurance amount.
To get the new State Pension, you'll usually need at least 10 qualifying years on your National Insurance record. To get the full new State Pension, you'll need 35 qualifying years.
If you reach State Pension age (SPA) after 6 April 2016 but have accrued benefits before 6 April 2016, you will have a 'starting amount'. This is the higher of:
The amount you would have got under the 'old' State Pension rules
The amount you would have got if you'd been under the new State Pension rules for your entire working life
Your starting amount will include a deduction if you were contracted out of the S2P.
If your starting amount is less than the full new State Pension, you may be able to build up more State Pension by adding more qualifying years of National Insurance to your record.
If your starting amount is more than the new full State Pension, the difference is called a 'protected payment'. This will be paid on top of the new State Pension and will increase each year in line with inflation.
The State Pension age (SPA) is changing:
The SPA for women will gradually increase to 65 by November 2018 and again to 66 between December 2018 and October 2020.
The SPA for men will gradually increase from 65 to 66 between December 2018 and October 2020.
You can find out more about the State Pension on the government's website.
The State Pension Deduction is a deduction that may be made to your Scheme pension to take account of the payment of the BSP. You’ll be contacted if this applies to you, and it will only apply if you joined the Scheme after June 1974. The State Pension Deduction is calculated using your pensionable service up to 31 March 1997 and fixed when you actually leave the Scheme, based on the level of BSP applicable at the time. It applies from SPA, when you start to receive your BSP.