HSC Pension Service 2008 Section Workshop Introductions l

HSC Pension Service 2008 Section Workshop

Introductions l John Coyle l HSC Pension Service Pension Liaison Team l Provide guidance to employers on Pension Regulations and Legislation l Providing workshops & presentations to scheme members updating you on the features and benefits of the scheme.

Purpose of Today’s Event l Today’s event is to provide you with information on the 2008 section of the scheme of which you are a member l We shall discuss options available to you regarding: a) b) c) increasing your benefits, options of when you can retire and claim your benefits and what choices you can make when approaching retirement.

Topics for Discussion § § § § Brief overview of the schemes Membership Pensionable Service Pensionable Pay Protection of Pensionable Pay Additional Pension Purchase Estimate of Benefits

Topics for Discussion cont. l l l l When can I retire VER Pension Normal Age Retirement Application Process Ill Health Pension Death & Survivors Benefits Q&A

The 2008 Section of the Scheme l l l l The 2008 section of the HSC Pension Scheme is a Defined Benefit pension scheme which pays benefits using a defined formula based on member service and Reckonable pay. Contribution rates vary from 5% to 14. 5% depending on your pensionable pay A pension is paid at a rate of 1/60 th of your service multiplied by your reckonable pay There is no automatic lump sum for the 2008 scheme but members can exchange a proportion of their pension to buy a tax free lump sum. , Normal Retirement Age is 65 Death in service lump sum of twice the value of your final years pensionable pay, (actual pay for part time workers) Survivors pension payable to spouse, partner, children

Membership of the 2008 Scheme l The scheme opened on 01/04/2008. l Membership ceases when you reach age 75 or have accrued 45 years membership l The 2008 scheme closed on 01/04/2015 unless you qualify through the protection arrangements l For full protection you had to be within 10 years of your Normal Retirement Age (NRA) at 01/04/2012. l This means you had to be aged 55 at 01/04/2012

Pensionable Service l l l Your pension benefits are calculated using a formula based on the amount of pensionable service you accrue and the average of the best 3 consecutive years pensionable pay in the last 10 years Your service is counted in the number of years and days you have actually paid contributions to the scheme If you worked part time your service will be calculated proportionately to the hours you have worked For example if you worked 3 days per week as opposed to 5. For each year you worked you would accrue 219 days (3/5 of a year = 219 days) Over a 15 year period this would mean you had reckonable pensionable service of 9 years as opposed to 15 Reduced paid sickness/maternity are still treated a full pensionable service (subject to part time contracts)

Factors which can positively affect Pensionable Service l Additional Hours – if a part time member works hours over and above their contracted hours up to the whole time equivalent, these will be converted to days and added to the service they have accrued. l For example a member who works 3 days per week works an additional day a week for a year that person will be credited with 73 days extra service. l Annual Leave, if you are paid for annual leave owing at retirement this is treated as pensionable service and will extend your retirement date

Factors which negatively affect Pensionable Service l The following factors will reduce a members reckonable service: Breaks in Service (periods where the member is not in pensionable employment) This can be as a result of the member opting out of the scheme for a period, the member may have a break between employments etc. Unpaid Leave This can refer to periods of unpaid sick, Authorised unpaid leave, unauthorised absence, Industrial Action Career Breaks If a member was on a career break and opted not to continue paying their scheme contributions they will not be credited with pensionable service for this period

How to Calculate 2008 Section Pensionable Service l Pensionable service is calculated over the period the member pays contributions. An ideal pension record could be as follows: l John joins the Belfast Trust and the HSC Pension Scheme on 01/04/2008 and works until retirement on 31/03/2022 l John worked full time and has had no breaks in service or no unpaid leave. l John’s service is calculated as follows: 01/04/2008 to 31/03/2022 = 14 years

How to calculate Pensionable Service l An employee with exactly the same start and leaving dates but working part time and full-time and having breaks in service l This shows how varied working patterns can effect pensionable service

Pensionable Pay 2008 Scheme l l l The figure used to calculate your pension is the average of the 3 highest consecutive years in your last 10 years service Leaver 31. 3. 22 – on the assumption that the last 3 years are the highest, pensionable pay for these years will be added together and an average used for calculation. If you are in part time service we use the whole time equivalent pensionable pay for your grade. If the reckonable pay for a Part time member working 50% of normal hours was £ 15, 000 a WTE figure of £ 30, 000 is used to calculate your benefits Pensionable pay is made up of all salary, wages and other regular payments but does not include bonuses, non-consolidated payments, expenses or overtime Salary Sacrifice can affect your pensionable pay figure.

Example Calculation l l Using the information from the previous examples we can see how part time service can affect the calculation of benefits. If we assume John’s Pensionable pay is £ 30, 000 Using the online calculator, Johns Pension would be calculated as follows: 14 years/60 x £ 30, 000 = Pension = £ 7, 000

Protection of Pensionable Pay l Protection through no fault of the member’s. l Member must have at least 2 years qualifying service l Through no fault of the member – Acceptable Reasons A change in the nature of the duties performed, for example due to ill health A move to a lower paid post because of pending or actual redundancy. Being transferred to other employment with an employer. Downgrading of Pay through AFC/RPA

Protection of Pensionable Pay l Request should be made within 3 months of reduction to pay l Members should apply using forms PROPAY 1 l Employer should complete PROPAY 2 l If protection of pay is applicable HSC pension service will calculate your benefits accrued to the date of reduction at the higher rate of pay

Partial retirement l The 2008 scheme first introduced this facility which is intended to support a phased withdrawal from the workplace with a reduction in employment commitments supplemented by partial payment of pension. l The concept of partial retirement is where an active member claims a portion of accrued benefits whilst still continuing in pensionable employment. The member is required to have a change to the terms & conditions of the continuing employment and a reduction in pensionable earnings. l Agreement with your employer must be sought

Partial Retirement/Drawdown l Partial retirement is a feature of the 2008 scheme where an active member claims a portion of accrued benefits whilst still continuing in pensionable employment l Member must have reached their MPA (Age 55) l Member’s Terms and Conditions must change and Pensionable Pay must be reduced to at least 90% of pensionable pay received in previous 12 months. l Pensionable Pay must remain reduced for a period not less than 12 months

Partial Retirement/Drawdown l If a members pay rises above the reduced amount in the 12 months following the beginning of partial retirement the pension in payment will be abated to zero. l Member must take at least 20% of their pension benefits and not more than 80% (pension will be reduced as paid before NRA) l Member can continue to accrue pension in the remaining proportion of benefits in the scheme l Member can only invoke this option twice

Partial Retirement Calculation l Member has built up pension benefits in the 2015 scheme valued at £ 6, 000 and wishes to claim 40% of their pension benefits accrued at age 60. l Member opts to partially retire by reducing their contract from 5 days to 4 days. Their pay reduces from £ 30 k to £ 24 k l 40% of the members pension in the 2015 scheme is £ 2, 400 per annum which must be reduced to £ 1, 668 (reduction factor of 0. 695) l Member has the option to convert part of the £ 1, 668 pension for a lump sum (use the on-line calculator)

Reduction Factors 2015 Section Pension Reduction Factors Years to Retirement 1 2 3 4 5 6 Factor 0. 946 0. 896 0. 849 0. 807 0. 767 0. 730 Years to Retirement 7 8 9 10 11 12 Factor 0. 695 0. 663 0. 633 0. 605 0. 578 0. 554

Partial Retirement Calculation l Member continues to build upon the remaining £ 3, 600 which grows to £ 6, 000 at age 64 l Member opts again to partially retire by reducing their contract from 4 days to 2 days and claim another 40% of their pension. Their pay reduces from £ 24 k to £ 12 k l 40% of the members remaining pension in the 2008 scheme is £ 2, 400 per annum which is reduced to £ 2, 037 (reduction factor of 0. 849) l Member has the option to convert part of the £ 2, 037 pension for a lump sum (using the on-line calculator)

Partial Retirement Calculation l Member continues to build upon the remaining £ 3, 600 which grows to retirement l Assuming the member did not convert part of their 2008 pension for lump sum their income for 2 days working plus partial retirement would be approx. £ 12, 000 + £ 1, 668 + £ 2, 037 = £ 15, 705 l The member will still be eligible for the remaining element of their 2008 scheme. l Member has the option to convert part of their remaining 2008 scheme pension for a lump sum.

Additional Pension Purchase l l l Members may increase their retirement package by opting to purchase additional pension benefits in blocks of £ 250 (up to a maximum of £ 5, 000 for 2008 section). You can make requests for the cost of purchasing additional pension by submitting Form AP 1 to HSC Pension Service will calculate and advise you of the costs (lump sum or instalments) If you opt to pay by instalments HSC Pension Service will liaise with Payroll Shared Service to set up deductions from your salary If you opt to pay by lump sum you should forward a cheque to HSC Pension Service Example cost of additional pension of £ 1000 per annum for Female age 59 = £ 291 per month for 5 years or £ 14, 960 lump sum

Estimate of Benefits l It is anticipated that Annual Benefit Statements will be Issued to all members prior to the end of the 2015/2016 Financial Year l Going forward, these will be available through Member Self Service and will provide members with information on their benefits accrued up to the end of the previous scheme year (31 st March) l You can visit the Calculators section of the Scheme website which has a link to a 2008 scheme calculator which can show you in principle how your pension benefits could grow in the future. l THESE FIGURES ARE FOR ILLUSTRATIVE PURPOSES ONLY

When Can I Retire? 2008 Section Benefits l The earliest retirement age in the 2008 Section of the scheme is Age 55. l If you retire before your Normal Pension Age (NPA) of 65 then your benefits will be reduced l The reduction factor which will be applied to your pension is dependant on the number of years & months to your NPA. l The reduction factor is applied as your benefits will be in payment longer than if you were to retire at your NPA

Reduction Factors 2008 Section Pension Reduction Factors Age 55 56 57 58 59 60 61 62 63 64 Factor 0. 609 0. 637 0. 668 0. 701 0. 735 0. 772 0. 812 0. 855 0. 900 0. 949

How does VER Affect my Benefits? Example VER Calculation: l Cathy retires at age 58 from the HSC Pension Scheme and has accrued the following benefits: l Pension = £ 8, 000 per annum. l There is no mandatory lump sum in the 2008 Section but you can convert £ 1 of your pension in exchange for £ 12 lump sum. l As Cathy is retiring early her benefits are reduced as follows: Pension £ 8, 000 x 0. 701 = £ 5, 608. 00 per annum l Survivors benefits are not affected by these reductions

Other Scheme Benefits Payable l Normal Age Retirement l Ill Health Retirement l Death in Service / Survivors Benefits

Age (Normal) Retirement l When you reach Normal Retirement Age (NRA) you can apply for your Pension Benefits. l Your benefits for the 2008 section are calculated using the service you have accrued up to retirement, and the average of your best 3 consecutive years pensionable pay in the last 10 years of scheme membership. l The following formula is used in the calculation: Service/60 x Reckonable Pay = pension

Age (Normal) Retirement l As there is no automatic lump sum in the 2008 section, you have the option to convert part of your pension to take a lump sum at a rate of £ 12 lump sum for every £ 1 of pension given up. l A calculator is available on the scheme website to show you how this can affect your annual pension amount l You cannot convert all of your pension for a one off lump sum.

Age (Normal) Retirement cont. l l l Karen has accrued 17 years service in the 2008 section of the scheme at retirement Karen had a reckonable pay figure of £ 20, 000 Using the online calculator we can establish that Karen’s pension is Pension = l £ 5, 666 Using the online Maximum Lump Sum calculator Karen's benefits could be converted to: Pension = £ 3, 643 Lump Sum = £ 24, 276

Pension Application Process l l l If you are thinking of retiring through Normal Age Retirement or VER you should meet with your Manager as soon as possible. (usually 4 months in advance of your proposed date) You may wish to visit the scheme website and use the calculator to estimate the value of your benefits When completing the AW 6 you should pay particular attention to Part 6, the section which asks if you wish to take a lump sum. At this point you should make a decision based on you own circumstances. (refer to the calculator on the website) HSC Pension Service will not advise you which option to choose, you may wish to speak to a financial advisor Please submit you birth certificate with the application form to speed up the process

Ill Health Retirement l a) b) l l l There are two types of Ill Health Retirement Tier 1 - where the member is found to be permanently incapable of efficiently discharging the duties of their employment Tier 2 - where the member is found to be permanently incapable of any regular employment If a member feels they meet the criteria for Ill Health Retirement and cannot continue in their employment, they can apply to have their pension benefits paid early. Your HR & OHS teams will assist you in this process If found to be medically unfit your benefits will be paid before NRA without any reductions applied.

Ill Health Retirement (Cont. ) l l Tier 1 benefits are based on the service you have accrued to date. For example Jane has accrued 12 years membership in the 2008 section of the scheme when she applied for and was accepted for Tier 1 Ill Health Retirement. Jane's benefits will be calculated using this amount of pensionable service and her reckonable pay figure If we assume Jane's reckonable pay figure is £ 25, 000 we can use the calculator on the scheme website to work out Jane’s benefits Pension = £ 5, 000

Ill Health Retirement (Cont. ) l Jane will have the option to commute some of her pension for a one off tax free lump sum l Assuming Jane wants a lump sum of £ 12, 000 we can use the online calculator to ascertain how this will affect her pension. l Jane’s benefits are now as follows Pension = £ 4, 000 Lump Sum = £ 12, 000

Ill Health Retirement (Cont. ) l Tier 2 benefits are based on the service you have accrued to date plus a possible enhancement of service up to your normal retirement age (age 65 in the 2008 section). l The amount of enhancement varies depending on your age, you will receive 2/3 rds of your prospective service to your NPA l The calculation for the enhanced element of the Tier 2 Ill Health Retirement Pension is based on a same formula used to calculate the value of your pension benefits accrued to date l We calculate the value of these benefits and add them to the benefits accrued under a Tier 1 pension to pay a combined pension

Ill Health Retirement (Cont. ) l If a member has a terminal illness and is awarded Tier 2 Ill Health Retirement and is found to have a life expectancy of less than one year they will have the option to commute their benefits to a one off lump sum. l This is calculated using the Tier 2 formula, giving the member the maximum lump sum payable by commuting a proportion of their pension at a rate of £ 12 lump sum for every £ 1 pension exchanged up to HMRC maximum limit. l The remaining pension is then multiplied by 5 and converted to a one off lump sum payment.

Death Benefits l If a member dies in service a death gratuity is payable equal to twice the members actual annual pensionable pay. This benefit is paid to the member’s spouse or estate (for unmarried/civil partnership members) unless otherwise requested (DG 3 form). l If Tom is a full time employee with an actual annual pensionable pay figure of £ 25, 000 and dies in service then the death gratuity payable is £ 50, 000 l If a part time member working 50% of their normal hours is on the same pensionable pay scale as John but their actual pensionable pay figure is £ 12, 500. Their death gratuity will be £ 25, 000 (2 x £ 12, 500)

Death Benefits cont. l An adult survivors pension is payable to a spouse, civil partner or nominated partner at a rate of 37. 5% of your notional tier 2 ill health pension for 2015 scheme membership l If there any dependent children a surviving children's pension is also payable. l The rate of Childs pension will be determined by the number of dependent children l A dependent child is deemed to be aged under 23 (or aged 23 or over and incapable of earning a living due to permanent physical or mental infirmity which he/she was suffering at the time the member died).

Death Benefit Nomination Forms l l l Ø Ø Ø A member can nominate anyone to receive the death gratuity in the event of their passing. This is done by completing the form DG 3 available from the scheme forms section of the website and submitting it to HSC Pension Service Form PN 1 can be used if you wish to nominate your partner to receive a survivors pension in the event of your death. Certain criteria must be met such as: you and your partner have been living together in an exclusive longterm relationship for at least 2 years; you and your partner are free to marry or to enter a civil partnership you and your partner are financially interdependent i. e. you rely on your joint finances to support your standard of living, although you do not need to be contributing equally

Contact Details HSC Pension Service Waterside House 75 Duke St Derry BT 47 6 FP E-Mail hscpensions@hscni. net john. coyle@hscni. net Website www. hscpensions@hscni. net Tel 02871 319111