Local Government Pension Scheme (Hampshire Pension Fund) 2012 pensions briefing ‘Your retirement choices’ Phil Villiers Pensions Communications Officer Pensions Services

Summary What it costs Your retirement choices ‘When can I retire?’ Paying extra contributions Government proposals for change Death-in service benefits - ‘to nominate or not to nominate’ ‘What should I do now?’ - some suggested action points Where can I get more information?

What it costs

You pay a percentage of your pay…. –.... your employer pays too –….(currently about 3 x what you pay) Your contributions attract tax relief….. –…..so you pay less tax! The scheme is ‘contracted out’….. –…..so you pay less NI! Example Whole-time employee earning £16,000 per year: –5.9% rate applies – so gross contribution = £78.67 per month –Monthly tax and NI savings=(£25.52) –So net cost to you= £53.15 per month

Your retirement choices

Final salary benefits Linked to final pay, not investment performance Pre-April 2008 service: Pension:1/80 x membership x final pay plus Tax-free lump sum:3/80 x membership x final pay Post-April 2008 service - introduction of ‘choice’: Pension:1/60 x membership x final pay With no tax-free lump sum or Can give up some pension for a tax-free lump sum: –£12 tax-free lump sum per £1 pension –Can take up to 25% x total pension fund value as tax-free lump sum

For example……….. Mr/Mrs Member joined scheme 1 April 1988 retires at 65 on 31 March years’ whole-time membership –20 years pre-April 2008 –4 years post-April 2008 final pay of £16,000

For example……….. 1)No pension given up for tax-free lump sum Pension Pre-April 2008:1/80 x 20 x £16,000= £ 4,000 per year Post-April 2008:1/60 x 4 x £16,000= £ 1,066 per year = £ 5,066 per year Tax-free lump sum: Pre-April 2008:3/80 x 20 x £16,000= £ 12,000 2)Give up £500 pension for tax-free lump sum Pension £(5,066 less 500)= £ 4,566 per year Tax-free lump sum Pre-April 2008 :3/80 x 20 x £16,000= £12,000 Pension given up: £500 pension x 12= £ 6,000 = £18,000 3)Take maximum tax-free lump sum Pension= £ 3,900 per year Tax-free lump sum = £26,000

For example……….. Basis PensionTax-free lump sum 1.No pension given up £5,066 per year £12,000 for tax-free lump sum 2.Give up £500 pension £4,566 per year£18,000 for tax-free lump sum 3.Take maximum tax-free lump sum £3,900 per year £26,000

‘When can I retire?’

When can I retire? Normal retirement - age 65 –Benefits payable in full Late retirement after age 65 –Benefits increased for late payment Early retirement –from age 55*…but only below 60 with employer consent –*except ill-health benefits, which can be paid at any age –benefits based on completed membership and reduced for early payment, except ‘85-year rule’ may apply if joined pre-1/10/2006 and ‘age + service’ = 85 enhanced benefits if leaving on redundancy/efficiency or ill-health Flexible retirement –with employer consent, draw benefits early but continue working –need to reduce pay (hours or grade) by at least 40%

‘Please sir, can I have some more?’ – paying extra contributions

Paying extra contributions Two options available under scheme: Additional regular contributions (‘ARCs’) –You buy a defined amount of additional pension Additional voluntary contributions (‘AVCs’) –You invest in funds with Zurich or Prudential –At retirement you use your AVC fund to buy extra pension and/or, increase your tax-free lump sum Both options - tax relief on contributions! For more information, go to our website: –Current member –Increasing my benefits

Government proposals for change The Government has agreed a series of proposals with the Trade Unions A single set of changes to be implemented in April 2014 Member contributions –contributions to increase for ‘higher-paid’ –some ‘lower-paid’ employees will pay less –option to pay 50% contributions for 50% of pension benefit Normal pension age –to be linked to state pension age, minimum 65 ‘Career average’ pension –‘Career average’ –accrual rate of 1/49th Protection for existing members –Career average benefits will only apply to future service –‘Underpin’ for those within 10 years of retirement at age 65 in April 2012 We will advise you when the final changes are announced.

Death-in service benefits ‘to nominate or not to nominate’

Death-in service benefits Lump sum death grant 3 x final pay (not ‘whole-time equivalent’ for part-timer/term-timer) –Hampshire Pension Fund decide beneficiaries taking your wishes into account –So you need to complete a death grant ‘expression of wish’ form Widow’s/widower’s/civil partner’s pension Paid to legal spouse/civil partner –You don’t need to complete an ‘expression of wish’ form for this benefit Nominated cohabiting partner’s pension Only paid if certain conditions satisfied: –You must complete a special ‘nomination’ form –‘free to marry’/2 year qualifying period/financial interdependent or fully dependent Children’s pensions Paid to ‘eligible children’ –in addition to any spouse/partner pension –no ‘expression of wish’ needed

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? When do I want to retire? ARCs or AVCs (or both!)? Update death grant ‘expression of wish’? Nominate cohabiting partner for pension? Independent financial advice? –IFA Promotions at

Where can I get more information? Come and speak to me afterwards! Employee guide Website: Pensions Services: Tel