University of Aberdeen Superannuation and Life Assurance Scheme Member presentation – Questions and Answers 4 June 2019

Question 1 – Commutation factors

Question 1 – Commutation factors Recently I have been given an estimation of my pension on my retirement date. I wanted to calculate what difference there would be to my pension if I took the maximum 25% tax-free lump sum. I know it may be difficult to generalise, but by taking the maximum tax-free lump sum the value of my pension pot is reduced by about £20k. I don’t understand why.

Answer 1 – Commutation factors See the member presentation from the 4 June 2019 AGM which discusses GMP Equalisation. You can think of a commutation factor as being the current value of £1 per annum of pension (payable for life). Pension given up x Commutation Factor = Lump sum received in exchange This is quite a complicated number to calculate! “How much money would I need to invest today… to be able to pay all of the future pension payments (that have been given up)?” Year 1 pension payment + Year 2 pension payment (Year 1 plus inflationary pension increases) + Year 3 pension payment + … For how many years until death? Requires making assumptions about future pension increases, mortality, and future investment returns. Therefore they change with market conditions, mortality assumptions and with age. You can ask for a copy of the current factors in force from the Pensions Office.

Question 2 – Can we be sure that all new employees at G5/G6 are given the choice of UASLAS or USS?

Answer 2 – UASLAS or USS? Can we be sure that all new employees at G5/G6 are given the choice of UASLAS or USS? The Pensions Office emails members as soon as they are informed of a member’s promotion/post change. Members are given the option to join USS or stay in UASLAS. Once made, it is an irrevocable decision.

Question 3 – Are AVCs included in the figures from Prudential (in the pension or the lump sum)?

Answer 3 –AVCs in Prudential figures? Are AVCs included in the figures from Prudential? Yes, quotations from Prudential should include all AVCs attributable to the member. The quotes show a range of scenarios available where AVCs are concerned. For example, the quotes show the AVCs as part of the pension in one scenario, and as part of the lump sum in another scenario. These figures are clearly labelled on the quotation to show how AVCs have been included and treated in each scenario.

Question 4 – What is GMP Equalisation?

Question 4 – What is GMP Equalisation? From the short report page 5: “GMP Equalisation – Lloyds Bank Court Case A Court judgment in the Lloyds Bank case was announced on 26 October 2018, which may have a small impact on members’ benefits from the Scheme. This relates to the equalisation of Guaranteed Minimum Pensions (GMPs) for men and women and applies to any GMPs earned from 17 May 1990 (the date of an earlier court case on equal treatment). In summary, the High Court confirmed that there is a legal obligation on pension schemes to equalise the calculation of GMPs for men and women. Members who are affected might be due a top-up on their pension, although for most members any top-up is likely to be small. This Court judgment will have an effect on a large number of members across the Scheme and carrying out the calculations will be a complex process, which could take many months and even years to complete. The Trustees will therefore update members again once progress has been made in this regard.” In plain words, what does this mean?

Answer 4 – What is GMP Equalisation? See the member presentation from the 4 June 2019 AGM which discusses GMP Equalisation. This is not likely to affect most members. For members who are affected, this is likely to have a very small impact on their pension. More information will be sent to affected members in due course.

Thank you Jonathan Seed FFA / Actuary T: 01786 237 014 E: Jonathan.Seed@xpspensions.com XPS Pensions Group, XPS Pensions, XPS Administration, XPS Investment and XPS Transactions are the trading names of Xafinity Consulting Ltd, Punter Southall Ltd and Punter Southall Investment Consulting Ltd. XPS Administration is the trading name of PS Administration Ltd. Registration Xafinity Consulting Ltd, Registered No. 2459442. Registered office: Phoenix House, 1 Station Hill, Reading RG1 1NB. Punter Southall Investment Consulting Ltd Registered No. 6242672, Punter Southall Ltd Registered No. 03842603, PS Administration Ltd Registered No. 9428346. All registered at: 11 Strand, London WC2N 5HR. All companies registered in England and Wales. Authorisation Punter Southall Investment Consulting Ltd (FCA Register number 528774) and Xafinity Consulting Ltd (FCA Register number 194270) are both authorised and regulated by the Financial Conduct Authority (FCA) for investment business.