Early retirement Early retirement

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Early retirement

Benefits available from age 55 with reductions to both income and PCLS.

Serious ill health

Benefits payable as a lump sum if member has a life expectancy of less than 12 months.

Lump sum death benefits

Early retirement – ill health

Scheme rules will determine how benefits will be calculated.

Lump sum death benefits

• Can be paid to anyone

Lump sum death benefits Did member die before or after crystallisation?

• Can be paid to anyone • Trustees have final say.

Lump sum death benefits Did member die before or after crystallisation?

Lump sum death benefits After

Lump sum taxed at 55% with no LTA test

Before

Did member die before or after crystallisation?

Did death occur before or after age 75?

LTA = Lifetime Allowance

Did member die before or after crystallisation?

Did death occur before or after age 75?

Lump sum taxed at 55% with no LTA test

LTA = Lifetime Allowance

Lump sum death benefits Before

After

Lump sum death benefits After

Lump sum taxed at 55% with no LTA test

Before

Before

Did member die before or after crystallisation? After

Did death occur before or after age 75?

Lump sum taxed at 55% with no LTA test

Before

Tax-free lump sum subject to a LTA test LTA = Lifetime Allowance

Dependant’s income • Can be paid to spouse, civil partner and/or dependants • There is no maximum pension • Scheme rules will detail the amount • Could be – A percentage of the member’s accrued pension at date of death – A percentage of the member’s pension projected to normal retirement age – A fixed percentage regardless of service.

Tax-free lump sum subject to a LTA test LTA = Lifetime Allowance

Early leaver options • Refund of contributions • Preserved pension • Cash Equivalent Transfer Value (CETV).

After

Refund of contributions

Refund of contributions

Membership must be less than 2 years.

Refund limited to personal contributions.

Refund of contributions

Refund of contributions

First £20,000 @ 20% Balance @ 50%.

Sarah: Started working for her employer on 1 January 2009 and joined their defined benefit scheme on 1 October 2009. She left service and the scheme on 31 July 2011 having paid personal contributions totalling £25,000.

Refund of contributions

Preserved pension

Sarah: Started working for her employer on 1 January

Must be offered after two years service and may be available earlier.

2009 and joined their defined benefit scheme on 1 October 2009. She left service and the scheme on 31 July 2011 having paid personal contributions totalling £25,000.

(£20,000 – 20% = £16,000) + (£5,000 – 50% = £2,500) = £18,500 refund.

Revaluation of contracted-out benefits Section 148 orders or fixed rate

GMP

Requisite Benefits

Accrual from 6/4/97 – 5/4/09: Minimum of CPI or 5% Accrual after 5/4/09: Minimum of CPI or 2.5%

Cash equivalent transfer value (CETV) Must be offered after three months membership.

Cash equivalent transfer value (CETV)

Revaluation of contracted-in benefits Date of exit

Revaluation

Before 1/1/86

No compulsory revaluation

1/1/86 – 31/12/90

Minimum of CPI or 5% for benefits accrued from 1/1/85

1/1/91 – 5/4/97

Minimum of CPI or 5% for all benefits

After 5/4/97

Minimum of CPI or 5% for benefits accrued to 5/4/09 Minimum of CPI or 2.5% for benefits accrued from 6/4/09

Cash equivalent transfer value (CETV) Calculate preserved pension

Cash equivalent transfer value (CETV)

Calculate preserved pension

Calculate preserved pension

Revalue to scheme NRD

Revalue to scheme NRD Capitalise the income

Cash equivalent transfer value (CETV)

Transfer value analysis system (TVAS)

Calculate preserved pension Revalue to scheme NRD Capitalise the income

Calculates the critical yield required to match the benefits being transferred.

Discount back to date of calculation

TVAS

TVAS

Establish member’s preserved benefits and revalue to NRD

Establish member’s preserved benefits and revalue to NRD Benefits capitalised using annuity rates set by the FSA

TVAS

Transfer from overseas scheme

Establish member’s preserved benefits and revalue to NRD Benefits capitalised using annuity rates set by the FSA Calculate growth rate required to provide future capital sum i.e. critical yield

Transfer from an overseas scheme to a UK scheme is not a recognised transfer.

Transfer from overseas scheme Member can claim an enhancement to their lifetime allowance equal to the value of the transfer.