- Slides: 35
Your pension changes Bringing it all together
Purpose of today’s session
Aims of today’s session Ø Help you understand what’s changing Ø Look at how UBPAS will change Ø How the new scheme will run from January 2020 Ø How you can take your benefits from both schemes Ø Answer any questions
What we will cover Ø Sources of income in retirement Ø State pension Ø Your University of Bristol Pension and Assurance Scheme (UBPAS) benefits and future options Ø Building up your University of Bristol Group Personal Pension (UBGPP) savings Ø How does the UBGPP work? Ø Creating a flexible retirement income Ø Next steps
‘Breaking the Code’ – some of the terminology Ø “UBPAS” is a ‘DB scheme’ = a defined benefit / final salary pension calculated by reference to a formula (e. g. 1/80 th), the years in the scheme and your salary at a given point Ø “True deferred” member – an ex-member of UBPAS who no longer works for the University Ø “Employed deferred” member – as above but who still works for the University Ø “Pensionable service” = the number of years in UBPAS Ø “UBGPP” = University of Bristol Group Personal Pension Plan – the new scheme available from 1 January 2020 Ø UBGPP is a ‘DC scheme’ = defined contribution / money purchase. It’s a savings plan funded by contributions from you and the University – end benefit not known Ø NRD = normal retirement date
Sources of income in retirement
Sources of ‘retirement income’ State Pension Other pensions Investments (e. g. shares/ISAs/property) Part time work UBPAS (plus tax free lump sum) UBGPP ‘Retirement’ income
State Pension ages are changing (men & women now aligned) 67 65 Born between Born before 6 March 1961 5 April 1978 6 Dec 1953 gradually increases DOB before Born between Born after 6 April 1950 6 Oct 1954 5 April 1960 6 April 1978 60 (women) 65 (men) 66 68
State Pension Ø The full State Pension currently provides £ 168. 60 pw (2019/20) Ø A reduction may be applied if: v You have fewer than 35 years’ National Insurance contributions (<10 years = no State Pension) AND / OR v You have been contracted out of the Additional State Pension (previously known as S 2 P/SERPS) Check your State Pension by visiting: https: //www. gov. uk/check-state-pension
Your UBPAS benefits and future options
What is changing in January 2020? Ø UBPAS was reviewed in 2016, after which you consulted about changes to the benefits it would provide. Ø Following the consultation, it was decided that the UBPAS would close to future accrual* on 31 December 2019 Ø (* this means your pension is calculated at this point rather than when you retire) Ø Until then, you remain an ‘active’ member of UBPAS. Ø On 1 January 2020 you become an ‘employed deferred’ member of UBPAS – but you will still have an ongoing entitlement to some of benefits (e. g. illhealth retirement options and spouse’s pension in the event of death) Ø You will then be automatically enrolled into the UBGPP, unless you decide otherwise.
UBPAS pre-February 2017 benefits UBPAS • 1/80 ths of ‘final pensionable salary’ up to 1 November 2013; • Either 1/80 ths , 1/100 ths or 1/110 ths of ‘final pensionable salary’ (depending on your contribution: 17%, 11% and 9% pa respectively) Tax free cash = 3 x pension Benefits can be paid from age 60 without any reduction for members with 25+ years ‘Scheme Service’, or from the 31 st July after reaching age 65 otherwise You could also pay Additional Voluntary Contributions and take this amount as tax-free cash or convert into additional Pensionable Service – subject to actuarial advice.
February 2017 to 31 December 2019 benefits Pension income built up on rate Your contribution 1/150 th 9% 1/135 th 11% 1/125 th 14% 1/110 th 17% 1/100 th 21% 1/80 th 28% Tax free cash 3 x pension UBPAS Benefits can be paid from age 60 without any reductions for members with 25+ Years of Scheme Service or from the 31 st July after reaching age 65 otherwise You could also pay Additional Voluntary Contributions and take this amount as tax-free cash or convert into additional Pensionable Service – subject to actuarial advice
Considering a transfer away from UBPAS? Ø It’s a complex decision – take time to consider carefully and don’t be rushed Ø If you do transfer your benefits from UBPAS, you can’t transfer them back at a later date - so think carefully! Ø Whether a transfer is a good idea or not depends upon your personal circumstances and your attitude and ability to take risks Ø You will need to get help from an adviser authorised by the Financial Conduct Authority (FCA) “When a firm. . is making a personal recommendation for a client who is, or is eligible to be, a member of a pension scheme with safeguarded benefits and who is considering whether to transfer, convert or opt-out, a firm should start by assuming that a transfer, conversion or opt-out will not be suitable” (Source: FCA handbook)
Transferring out UBPAS……. be suspicious!! Ø If it looks too good to be true – it usually is! Ø Being approached unexpectedly by phone or text message Ø Pushy people claiming to be advisers Ø References to: Ø “pensions loan” Ø “savings advance” Ø “cashback from your pension” Ø Talk of: Ø loopholes, overseas investment, or new investment techniques Ø “others have already invested” Ø “the deal is only available for a short time – act quickly to get it now” Ø “the investment offers returns above the market rates” If you’re suspicious, report it FCA consumer helpline: 0800 111 6768 https: //www. fca. org. uk/scamsmart https: //www. youtube. com/watch? v=Deeriddm. QE
Death benefits Benefit Lump sum Pre 1 January 2020 Post 1 January 2020 Active members of the UBPAS Active members of the UBGPP Employee who is an employed deferred member of the UBPAS (and has not transferred out) (In addition to UBGPP benefits) 4 x ‘Pensionable Salary’ at date of death (if no Spouse’s pension payable) Return of any employee contributions 2 x ‘Pensionable Salary’ at date of death (if a Spouse’s pension payable) Return of full UBGPP pension fund plus 6 x basic salary (irrespective of marital status) Subject to the insurer’s terms and conditions Plus Payments are usually tax free Return of any employee contributions Payments are usually tax free Survivor pension Spouse’s pension of: 2/3 rds x prospective pension based on Pensionable Service to NRD (subject to a maximum of 40 years) and Final Pensionable Salary at date of death None Spouse and children’s pensions payable as for an employed deferred member of UBPAS before 2020 but based on: Pensionable Service to 31 Dec 2019 (subject to a maximum of 40 years); and Additional children's pensions may be payable Final Pensionable Salary at 31 Dec 2019 Pension payments are subject to income tax
Long-term incapacity benefits Benefit Incapacity benefit Pre 1 January 2020 Post 1 January 2020 Active members of the UBPAS Active members of the UBGPP Ill-health pension Income Protection Insurance benefit aiming to provide: The rules are complex but in simple terms: 50% x basic salary income; plus If after a period of absence and deemed to be suffering from ‘Partial Incapacity’ (i. e. unable to perform your normal occupation and serious impairment of earnings capacity) then immediate unreduced pension payable based on service at retirement date and Pensionable Salary at retirement date. If deemed to be ‘Total Incapacity’ (i. e. unable to perform any other gainful or suitable employment in the foreseeable future) then immediate unreduced pension payable based on potential years’ service to NRD (subject to a maximum of 40 years) and Pensionable Salary at retirement date Payable until death: payments may be suspended until NRD or reduced if you resume working or through recovery. Payments are subject to income tax 10% x basic salary pension scheme contributions Payable up to State Pension Age following 26 weeks of Incapacity commencing on or after 1 Jan 2020 (which prevents you from performing your occupation and you are not following any other occupation) Subject to the insurer’s terms and conditions. Benefit potentially payable until the earlier of recovery, getting to State Pension Age, death, end of fixed term contract, or working elsewhere. The insurer may reduce the income protection payments if the combined ill-health pension and income protection benefit will exceed the insurer’s maximum income threshold. Payments are subject to income tax and National Insurance Employee who is an employed deferred member of the UBPAS (and has not transferred out) (in addition to UBGPP benefits) Ill-health pension As pre 1 January 2020 but calculated with reference to ‘Pensionable Service’ and ‘Final Pensionable Salary’ at 31 Dec 2019 Payable until death: payments may be suspended until NRD or reduced if resume working or recovery. Payments are subject to income tax
How does the UBGPP work?
Joining the UBGPP Employed deferred members of UBPAS automatically join the UBGPP. Benefits include: Improved contribution structure Enhanced employer contributions* * For those UBPAS members who were active members immediately prior to the UBPAS closing to accrual.
Selecting your UBGPP contribution rate Ø You will be able to choose the level of contribution you want to make to the UBGPP from January 2020 (subject to a minimum contribution of 4%) Ø The level of contributions the employer makes will depend on your chosen contribution level and any enhancement you are eligible for as a result of your previous membership of the UBPAS Ø As a UBPAS employed deferred member enhanced employer contributions apply if you choose to contribute to the UBGPP at or above 9% (see the next slide for details) Ø You will receive a contribution option form in October after the last of these presentations Ø You will need to complete and return this form promptly so payroll can be set up to implement your chosen contributions from 1 January 2020 Ø If you do not actively choose your UBGPP contribution rate you will be automatically enrolled at a contribution level of 9%
Contribution rates to the UBGPP Contribution rates to UBGPP from 1 January 2020 Standard existing UBGPP options Employee contribution rate Employer contribution rate 4% 5. 0% 5% 6% 8. 0% 7% + 9. 5% 9% to 10. 99% 10. 5% 11% to 16. 99% This option is only available to UBPAS members who paid contributions of 11% or more of pensionable pay to UBPAS during the period Enhanced options for UBPAS 1 February 2017 to 31 December 2019 employed deferred members 11. 5% 17%+ This option is only available to UBPAS members who paid contributions of 17% or more of 12% pensionable pay to UBPAS during the period from 1 February 2017 to 31 December 2019
Building up your UBGPP savings
Building up savings in the UBGPP Lump sum up to 25% tax free Your contributions invested* Tax-efficient growth University contributions Use the rest to generate an income or take a taxable lump sum *Charges apply to the investments held in the UBGPP
What does the UBGPP with L&G look like? Ø It has its own microsite which you can visit now Ø www. legalandgeneral. com/uob Ø The site shows the ‘four step journey’ from joining to taking benefits Ø There a link to ‘Manage Your Account’ (MYA) which contains planning tools plus lots of video interactive content Ø You activate MYA once you join the scheme Ø The ‘Document Library’ hold Key Features and Member guides etc as well as a ‘Financial Wellbeing’ link Ø You’ll learn more about where contributions are invested closer to the joining date – but charges on the UBGPP are very competitive (c 50% cheaper than the maximum permitted)
L&G online tools
Flexible retirement options
Taking your UBGPP benefits Pension Pot Tax Free Cash Annuity Defer Income Remain Invested Taxable Income Drawdown Income Cash Lump Sum
When will you take your UBGPP benefits? Before other pensions With other pensions Later in retirement The UBGPP could bridge the gap between retiring and receiving your UBPAS and / or State Pension Receive your UBGPP at the same time as other retirement income Draw your UBGPP later in retirement or leave the proceeds to your beneficiaries
Taking your UBGPP savings: ‘cashing out’ 25% tax free lump sum 75% Taxable lump sum
Taking your UBGPP savings: ‘drawdown’ 25% tax free lump sum Invested Flexible Make flexible withdrawals to create a taxable 'income’ Remaining amount is invested and can be drawn in the future as a taxable ‘income’
Taking your UBGPP savings: taking your lump sum in phases 75% Invested Of this withdrawal is taxable Remaining amount is invested and can be drawn in the future 25% Of this withdrawal is tax free
Taking your UBGPP savings: pension income Buying a secure income for life (“annuity”) Receive up to 25% as a tax free lump sum Choose from options including • A guarantee period • Inflation linking • Spouse/partner pension The income you receive will be determined by your circumstances Buy an annuity with the remainder This will provide a secure income throughout your retirement
Useful contacts Primary contacts: UBPAS Ø Barnett Waddingham: Ø 0333 111 1222 Ø [email protected] co. uk UBGPP Ø L&G Helpline: Ø 0345 070 8686 Ø University Pensions Team: Ø 0117 428 2616 Ø [email protected] ac. uk
Use of our work Philip Audaer Principal 020 7432 6777 philip. [email protected] uk. com Prepared on 5 September 2019 This generic presentation should not be relied upon for detailed advice or taken as an authoritative statement of the law. If you would like any assistance or further information, please contact the partner who normally advises you. While this document does not represent our advice, nevertheless it should not be passed to any third party without our formal written agreement. Our experts work in pensions, investment, insurance, energy and employee benefits. Join us at our next event www. lcp. uk. com/events Share our insights and opinions on our viewpoint www. lcp. uk. com/ourviewpoint Watch and listen to our comments on topical issues Our You. Tube channel Connect with us for updates @LCP_actuaries Linked. In Lane Clark & Peacock LLP is a limited liability partnership registered in England Wales with registered number OC 301436. LCP is a registered trademark in the UK (Regd. TM No 2315442) and in the EU (Regd. TM No 002935583). All partners are members of Lane Clark & Peacock LLP. A list of members’ names is available for inspection at 95 Wigmore Street, London, W 1 U 1 DQ, the firm’s principal place of business and registered office. The firm is regulated by the Institute and Faculty of Actuaries in respect of a range of investment business activities. Locations in London, Winchester, Ireland - operating under licence - the Netherlands. © Lane Clark & Peacock LLP 2019 http: //www. lcp. uk. com/emails-important-information contains important information about this communication from LCP, including limitations as to its use.