1. Hampshire Pension Fund “What about my pension?” A presentation to staff Phil Villiers Pensions Communications Officer Pensions Services

2. Government proposals for change This presentation reflects the current structure of the LGPS. The Government is proposing changes to the LGPS. Proposals agreed between Government and Trade Unions –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 as soon as any changes are announced.

3. Summary Scheme overview “What if I take redundancy? I’m under 55” –Deferred benefits “What if I take redundancy? I’m over 55” –Immediate pension benefits Remaining in service –Reducing hours –Flexible retirement –Re-deployment Where can I get more information?

4. Scheme overview Final salary (currently!) Pension/tax free lump sum –Pre-April 2008 service: 80ths pension + 3/80ths tax-free lump sum –Post-April 2008 service: 60ths pension –Option to give up some pension to increase tax-free lump sum Normal retirement age 65 Leaving service before age 65: –Can retire early from age 55 Employer consent needed for retirement below age 60 Benefits reduced for early payment – unless –protected under ’85-year rule’ –leaving on account of redundancy –If not retiring, ‘deferred benefit’ paid at age 65 See our website for more details (www.hants.gov.uk/finance/pensions)

5. “What if I take redundancy? I’m under 55” Deferred benefits – no special terms on redundancy Benefits built-up in scheme, based on –final pay and –completed membership –at date of leaving You need to claim ‘best 3 in 10 definition’ of final pay if it applies to you Deferred benefits stay in scheme and are paid on retirement at age 65 Benefits ‘index-linked’ from date of leaving to retirement They can be paid from age 60 –but will be reduced unless protected under ‘85-year rule’ They can be transferred to another scheme – see next slide If allowed by employer, you can use ‘non-statutory’ redundancy pay to increase deferred pension

6. “What if I take redundancy? I’m under 55” Deferred benefits – transferring out They can be transferred to your new employer’s scheme, –‘LGPS’ employer you can combine ‘deferred membership’ with new LGPS membership contact new LGPS administrator to do this –‘Non-LGPS’ employer you may be able to transfer your deferred benefits to new scheme contact your new pension provider for more details They could also be transferred to a personal pension scheme –contact your new pension provider for more details Transfers are not ‘automatic’ –we will not transfer your benefits without your written authority

7. “What if I take redundancy? I’m under 55” Deferred benefits – example Employee aged under 55: Leaving on 31 March 2012 Final pay of £20,000 10 years completed membership Deferred benefits – payable from age 65: Pension: –Pre-April 2008: 1/80 x 6 years x £20,000 = £ 1,500.00 per year –Post-April 2008: 1/60 x 4 years x £20,000 = £ 1,333.33 per year –Total pension £ 2,833.33 per year* Tax-free lump sum: –Pre-April 2008: 3/80 x 6 years x £20,000 = £ 4,500.00* *these benefits will be –‘index-linked’ from date of leaving to retirement –reduced if paid from age 60, unless protected under 85-year rule.

8. “What if I take redundancy? I’m over 55” Retirement on enhanced benefits Immediate payment of benefits built-up in scheme –pension plus tax-free lump sum –option to give up some pension for more tax-free lump sum Based on final pay and completed membership at date of leaving –you need to claim ‘best 3 in 10 definition’ of final pay if it applies to you No reduction for early payment You cannot take deferred benefits instead –if you’re over 55 you must draw immediate benefits!

9. “What if I take redundancy? I’m over 55” Immediate retirement benefits – example Employee aged over 55: Leaving on 31 March 2012 Final pay of £20,000 20 years completed membership Retirement benefits – payable immediately: Pension: –Pre-April 2008: 1/80 x 16 years x £20,000 = £ 4,000.00 per year –Post-April 2008: 1/60 x 4 years x £20,000 = £ 1,333.33 per year –Total pension £ 5,333.33 per year Tax-free lump sum: –Pre-April 2008: 3/80 x 16 years x £20,000 = £ 12,000.00 Employee can give up some of the pension to increase the tax-free lump sum (£12 lump sum per £1 pension given up)

10. “What if I take redundancy? I’m over 55” Retirement on enhanced benefits Additional contributions cease at date of leaving –Added years Option available to pay remaining contributions in contract –ARCs No option to pay remaining contributions in contract Reduced benefit paid, based on contributions paid to date of leaving –AVCs Fund used to increase retirement benefits Opportunity to pay AVCs before leaving to increase tax-free lump sum? Redundancy payment –If allowed by employer, option to use non-statutory element of redundancy payment to increase pension

11. “What if I take redundancy? I’m over 55” Retirement on enhanced benefits Pension in payment –subject to income tax, not N.I. –pensions increases annual review in April based on annual increase in Consumer Prices Index (‘CPI’) at previous September –may be ‘abated’ if you are subsequently employed by an employer that participates in the LGPS: your LGPS pension will be reduced (‘abated’) if your new annual pay + LGPS pension exceeds your pay when you retired. example on next slide

12. “What if I take redundancy? I’m over 55” ‘The abatement rule’ – an example: You retire from LGPS –Rate of pay upon retirement£ 20,000 per year –LGPS pension, after any ‘commutation’£ 5,000 per year You get a new job with an LGPS employer –New rate of pay£ 16,000 per year –Add LGPS pension£ 5,000 per year –New pay + LGPS pension£ 21,000 per year Abatement: –New pay + LGPS pension£ 21,000 –Less rate of pay upon retirement £(20,000) –Pension will be reduced by£ 1,000 –Revised ‘abated’ LGPS pension£ 4,000 per year For more details see our website: ‘Got a question A-Z’ -> (R)e-employment

13. Remaining in service – reducing working hours Pension benefits are linked to ‘Whole-time equivalent’ membership and ‘Whole-time equivalent’ final pay So if you reduce your working hours your completed period of membership is not reduced your future ‘part-time’ membership will be converted to a ‘whole-time equivalent’ period at retirement, all your benefits are linked to your ‘whole-time equivalent’ final pay For more details see our website: –Got a question A-Z –(P)art time working/membership

14. Remaining in service – reducing working hours Example Employee reduces working hours from 1 April 2013 age 61 at 31 March 2013 20 years whole-time completed membership whole-time pay = £18,000 a year reduces hours to 18½ hours a week (50% whole-time) Part-time pay = £9,000 a year Retires at 65 in 2017 last year’s part-time pay = £10,000 Membership/final pay at age 65: Total membership at 65: –20 years plus 2 years (4 years x 50%) =22 years Final pay at 65: –(10,000 x 2) =£20,000

15. Remaining in service – flexible retirement Available if over 55 With employer consent, –drawing benefits early and –continuing working on reduced hours/lower grade* –*level of reduction included in employer discretionary policy Retirement benefits payable: –as if leaving service voluntarily and retiring with employer consent, –so reduced for early payment, unless 85-year rule applies ‘Abatement rule’ does NOT apply on flexible retirement Can continue paying into LGPS to build up additional benefit

16. Remaining in service - re-deployment Remain in same job with pay freeze or reduction: Remain in current membership: –On leaving service, alternative final pay definitions may apply: Best of the last 3 years Average of best 3 consecutive years in the last 10 If employer allows, defer existing membership: –cease existing membership and defer benefits –re-join scheme for future service. May not be best course of action – several factors to be considered For more details see our website: –Got a question A-Z –(R)eduction in pay

17. Where can I get more information? ‘Any questions?’ Employee guide Website:www.hants.gov.uk/finance/pensions Pensions Services: Emailpensions@hants.gov.uk Tel 01962 845588 You can find details of local independent financial advisers at www.unbiased.co.uk