Your future – a guide to your benefits for members of the money purchase section of the Aviva Staff Pension Scheme (the Scheme)
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Staff Pensions, money purchase
October 2014
Important changes to the Aviva Staff Pension Scheme (the Scheme)
New choices The Government has introduced changes to pensions giving you more flexibility over how you take your money purchase savings from April 2015. The main change is that you now don’t have to buy a pension (annuity) when you take your benefits. Instead, you’ve got more freedom, and can take one or a combination of the following options: • Buy an annuity • Draw down an income • Take a single or series of lump sums Which option you choose may affect how you invest your money purchase pension account in the years before your target retirement date. The Scheme guides don’t reflect these changes at the moment, but we’ll be updating them soon. If you’d like more information now, take a look at Explore more: your new choices at retirement in the library section at www.avivastaffpension.co.uk or contact Aviva Staff Pensions (see inside for contact details).
April 2015
Staff Pensions
Your future Not only does the Scheme provide you with a pension for life, it also provides a range of valuable benefits for both you and your dependants. This guide explains in more detail the benefits that the Scheme provides. Certain terms used in this guide have special meanings. These are explained in the guide ‘Your Scheme – an introduction’ and appear in bold text throughout this guide. Active members of the final salary section (now known as the defined benefits section) of the Scheme on 31 March 2011 may have protection for some of their benefits. For more information you should also read the supplement for your section which is available under the protected DB benefits tab at www.avivastaffpension.co.uk
Contents Your future – when you retire
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– if you leave
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– protection for your dependants when you die
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– State pension
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– when you retire At a glance… • Your target retirement date is State pension age, unless you choose otherwise. This is the age you expect to take your benefits and we use this when estimating the value of your money purchase benefits. • The Scheme’s normal retirement date is age 60. • Y ou may be able to retire earlier or later than the Scheme’s normal retirement date (or at any time if you are suffering from permanent incapacity). • You can take part of your pension account as cash, currently tax free. • Your pension account will be credited with extra Employer contributions if you retire due to permanent incapacity.
How much will my pension be? At retirement, the value of your pension account will be used to buy you a pension and other retirement benefits of your choice. How much your pension will be will not be known until you actually retire and it will depend on: • how much you and your Employer contribute to your pension account; • how well the investment funds that you have chosen perform; • the options you choose at retirement (see pages 4 and 5); and • the cost of buying a pension when you retire. You will receive a forecast of what your pension might be in a personal benefit statement, which we send you every year until you retire. However, this statement does not provide a guarantee of your account value at retirement or the pension it might buy. The Trustee will arrange your pension by buying an annuity from an insurance company. You will be provided with details shortly before you retire and will be given the opportunity to choose the insurance company and terms of benefits. If you do not choose, the Trustee will choose for you but does not guarantee that the annuity will be the most appropriate for your circumstances. The terms on which your pension is paid (e.g. monthly payments, period of payment guarantee, annual increases) will depend on the type of pension you choose at retirement. This is also subject to any legal requirements applying at that time and to the terms imposed by any insurance company with which your pension is purchased. Your pension will be taxed under the PAYE system. www.avivastaffpension.co.uk
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What is the Scheme’s normal retirement date? The Scheme’s normal retirement date is age 60. You may be able to retire earlier or later than this. Your target retirement date is the age you expect to take your benefits. We use your target retirement date when estimating the value of your money purchase benefits and, if you are invested in the Lifestyle strategy, it also determines when your pension account will start to switch into more stable cash and bond funds. Unless you make a choice, we will assume your target retirement date is State pension age.
Can I retire early? With the Company’s consent, you may retire before the Scheme’s normal retirement date, at any time from age 55, and receive an immediate pension. Your benefits on early retirement will be worked out in the same way as for normal retirement. However, your pension will generally be smaller as the value of your pension account is likely to be less and your pension may be paid for a longer period (and is therefore more expensive).
Can I retire late? If you continue working after the Scheme’s normal retirement date, your Employer will continue to credit contributions to your pension account on your behalf. Your benefits will be payable at the date you actually retire.
What happens if I become ill? If your Employer decides, based on medical evidence, that at any age you are suffering 4
from physical or mental incapacity which prevents you from following any employment with your Employer or any other Employer participating in the Scheme and which is likely to be permanent and you leave service because of this, you may receive an immediate ill-health pension.The Trustee will also need to obtain evidence that you are suffering from physical or mental impairment which prevents (and will continue to prevent) you from carrying on your occupation. If you qualify for an ill-health pension and the Company agrees to a pension being paid, the value of your pension account will be increased by an additional amount. This amount is equal to the basic Employer contribution of 8%, which you would have received had you remained in service until age 65. This lump sum will be based on your pensionable salary at the date you retire. The total value of your pension account will then be used to provide you with benefits in the same way as for normal retirement.
Can I take a cash sum at retirement? When you retire, you may take some of your pension account as a cash sum. This means that you will have less money available to buy a pension. Under current legislation, the cash sum is paid free of tax, although this could change in the future. The maximum cash sum is usually 25% of your pension account. To ensure that you do not pay tax, you must exercise this option and the cash sum must be paid to you no more than 12 months after your retirement date. Further information about the amount of cash you can take will be provided before you retire.
Note: If you are employed in the Channel Islands, your option to take a cash sum may be affected, for any period of service during which you were liable for Jersey Social Security contributions or Guernsey Social Insurance contributions. • I f employed in Jersey, your cash sum cannot exceed a quarter of the value of your pension account. • I f employed in Guernsey and your total cash sum on retirement exceeds a specified amount, there may be a tax liability. For more information on specific legislation for Channel Islands employees, please contact the Staff Pensions, Money Purchase Team (details are on page 15).
Can I provide benefits for my dependants? At retirement, you can choose whether to provide benefits for your spouse or civil partner (or other dependant(s) if you do not have a spouse or civil partner) in the form of a lump sum and/or pension, payable on your death. If, at retirement, you don’t choose to provide benefits for your spouse, civil partner or dependant(s), no benefits will be payable to them under the Scheme on your death. Under current arrangements, if you leave the Scheme you can also take out life assurance with Aviva. This provides cover up to four times’ your annual pensionable salary immediately before you leave the Scheme. This cover would be at your own expense and on Aviva’s standard commercial terms. You would not have to produce any evidence of health. This option will only apply while Aviva is the insurer of the lump-sum death benefit under the Scheme and offers an appropriate policy.
Note: Before you can receive your benefits when you retire, you will need to provide the Trustee with details of your other retirement benefits. This is so that the Trustee can assess whether your benefit exceeds the Lifetime Allowance (LA). If the value of your total retirement benefits exceeds the LA, you will be liable for tax on the amount in excess of the LA. The LA for the 2014/2015 tax year is £1.25 million. The Trustee is required to deduct any tax due on the value of your benefits above the LA before providing you with your Scheme benefits. If you do not provide satisfactory evidence of your other retirement benefits, the Trustee may be unable to put your benefits into payment, or may assume that the whole of your benefits exceed the LA and are subject to tax (and it will be your responsibility to reclaim it).
Further details of these options will be provided before you retire.
www.avivastaffpension.co.uk
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Your future – if you leave At a glance… • Y our benefit options on leaving vary, depending on how long you have been a Scheme member. • Y ou can elect to take out a life assurance policy with Aviva without producing evidence of health if you leave your Employer’s service. If you leave the Scheme before retirement, the following options will be available to you, depending on your length of pensionable service.
two or more years You can keep your pension account invested in the Scheme until retirement. If you choose this option, no more contributions will be paid into your pension account, but it will continue to be invested until you retire, and you can continue to make investment choices. You will still have the same options for your benefits when you retire. If you die before your benefits become payable, the value of your pension account will be used to provide benefits for your spouse, civil partner or other dependants, at the discretion of the Trustee. Or You can ask the Trustee to transfer the value of your pension account to: • the pension scheme of your new Employer; • a personal pension; or • an approved insurance policy.
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If you have been a member for... less than two years but more than three months You can opt to transfer your pension account to another pension arrangement. You must complete this option within three months of receiving details of your pension options and benefits. Or You can receive the value of your own contributions, less tax*. You will not receive the value of any Employer contributions credited to your pension account. If you don’t complete the transfer of your pension account within three months of being granted the opportunity to do so, you will be deemed to have chosen this option.
less than three months You will receive the value of your own contributions, less tax*. This amount could be more or less than the total contributions you have paid, as it depends on investment returns during your period of membership. You will not receive the value of any Employer contributions credited to your pension account.
You will not be entitled to any further benefits from the Scheme. * If you participate in Salary Exchange and you are eligible for a refund, you will receive an amount that is equivalent to what you would have paid if you had made your pension contributions in the normal way. This payment, made to you by the Employer after leaving the Scheme, is subject to tax and NI. Note: These options may not be available if you have transferred benefits into the Scheme from another pension arrangement.
www.avivastaffpension.co.uk
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If you are interested in transferring out of the Scheme see page 9 of the guide ‘Your Scheme – an introduction’, (section on opting out) for more information. A transfer value quotation can be obtained from the Staff Pensions, Money Purchase Team (see page 15). A transfer value can be taken at any time up to one year before your normal retirement date. Note: If you are based in Guernsey, you have the option to receive the current value of any contributions you have paid, less tax, instead of keeping your pension account invested in the Scheme or transferring your fund to another pension arrangement. Please note that this is only possible providing that it does not infringe UK legal requirements.
Can I continue my life insurance cover on leaving? Under current arrangements, you can also take out life assurance with Aviva – for cover up to four times’ your annual pensionable salary immediately before you leave the Scheme. This would be at your own expense and on Aviva’s standard commercial terms, but you would not have to produce any evidence of health. This option will only apply while Aviva is the insurer of the lump-sum death benefit under the Scheme and offers an appropriate policy. This option is only available within two months of leaving service. If you are interested in taking up this option, please contact the Staff Pensions, Money Purchase Team (see page 15).
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www.avivastaffpension.co.uk
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Your future – protection for your dependants when you die At a glance… If you die before retirement and while still contributing to the Scheme: • A lump-sum death benefit is paid. • A pension is payable to your spouse, civil partner or, if you do not have a spouse or civil partner, your nominated partner or children. If you die after retirement: • Your dependants may be entitled to a lump sum or pension, if you chose this option at retirement. Don’t forget to complete a Nomination form and keep it up to date. The Scheme offers valuable benefits to protect your dependants when you die, either while you are a contributing member of the Scheme or after you retire, depending on the options you choose. Active members of the defined benefits section of the Scheme on 31 March 2011 may have protection for some of their benefits. For more information you should also read the supplement for your section which is available under the protected DB benefits tab at www.avivastaffpension.co.uk
What benefits are payable if I die while contributing to the Scheme? If you die while contributing to the Scheme and are employed by an Employer participating in the Scheme, the following benefits are payable:
Cash lump sum The greater of: • four times’ your annual pensionable salary at the date of your death; or • t he value of the part of your accumulated pension account attributable to your Employer’s contribution credits; plus • the value of your own contributions to the Scheme, including any paid under Salary Exchange. 10
You should complete a Nomination form to let the Trustee know to whom you would like the lump sum paid. It is important that you keep the form up to date if your personal circumstances change. The Trustee makes the final decision on who receives the benefit. The Trustee will take your wishes into account but cannot be bound by them. You can download a Nomination form from your library section at www.avivastaffpension.co.uk or alternatively, you can request it from the Staff Pensions, Money Purchase Team (see page 15 for details).
Pension The amount of pension will depend on the value of your accumulated pension account less the value of your own contributions at the date of death. The value of your pension account will be increased by a lump sum, which is equal to the basic contribution of 8% of your pensionable salary at the date of death, and would have been credited to your fund had you remained in service until age 65. If you are married or in a civil partnership at the date of death The pension will normally be paid to your spouse or civil partner. However, you may request the Trustee to consider paying part or all of the spouse’s or civil partner’s pension to another dependant or dependants who meet(s) criteria laid down by the Company and the Trustee. These criteria are reviewed from time to time. The Trustee has a discretion as to whether any part of your pension is paid to the person you nominate. However, if you do not make a nomination, the Trustee will not be able to consider paying the benefit to anyone other than your spouse or civil partner.
If you are not married or in a civil partnership at the date of death The pension may be paid to a nominated partner provided the person you have nominated meets criteria laid down by the Company and the Trustee. The Trustee will decide on your death whether the person you have nominated meets these criteria, which are reviewed from time to time. Note: If you do not complete a Nomination form and are not married or in a civil partnership at the date of death, no pension is payable unless you have children.
www.avivastaffpension.co.uk
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How do I nominate who I would like to receive a pension? To nominate a person (other than your spouse or civil partner) to receive a pension, you need to complete a Nomination form which sets out the criteria currently applicable. You can get a Nomination form from your library section at www.avivastaffpension.co.uk or from the Staff Pensions, Money Purchase Team (see page 15). It is important that you keep the form up to date if your personal circumstances change.
Note: The person you nominate will be asked to provide evidence that he or she satisfies the applicable criteria at the date of death.
How long is the pension paid for my dependants? A spouse’s, civil partner’s or nominated partner’s pension is paid for life. Any children’s pension is paid until age 18, or up to age 23 if the child is in full-time education or vocational training approved by the Trustee. The pension will normally be paid by monthly instalments and tax will be deducted under the PAYE system.
What benefits are payable if I die in retirement? Your dependant(s) may receive a lump sum and/or pension, depending on the benefit options you choose at retirement.
Note: For members who transferred from the former scheme: • T he level of death-in-service benefits as at 31 December 2001 (based on pensionable salary at that date) under the former scheme will still apply, if higher than the Scheme benefits described on pages 10 and 11. • I f you are married or in a civil partnership at the date of your death, the Trustee will decide whether to pay benefits to your spouse, civil partner or your children – or to your nominated partner or your children. You must complete a Nomination form to let the Trustee know to whom you would like the pension paid if you wish the pension to be paid to a nominated partner. I f you do not complete a Nomination form and are not married or in a civil partnership at the date of death, no pension is payable unless you have children.
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Your future – State pension At a glance… • I n addition to your Scheme pension, you may be entitled to receive benefits from the State when you reach State pension age. • There are two levels of State pension: – Basic State pension – State Second pension.
What pension does the State provide? The State currently provides two levels of pension from State pension age:
Basic State pension You will receive this if you have paid enough NI contributions. The amount you receive is reviewed each year.
State Second pension (S2P) This is paid in addition to the basic State pension and replaced the State Earnings Related Pension Scheme (SERPS) in 2002. The amount of S2P you will receive is a complicated equation, depending on how much you earn during your working life, different earnings bands and thresholds.
What is State pension age? The State pension age (SPA) is currently 65 for men and 60 for women. However, the SPA will rise to 66 by 2020 for both men and women. To calculate your individual SPA, go to www.gov.uk/calculate-state-pension
www.avivastaffpension.co.uk
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Your future – State pension (continued) Will I receive a State pension? Membership of the Scheme does not affect your entitlement to the basic State pension. This pension is paid on top of your Scheme pension. While you are a member of the Scheme, you will also build up an entitlement to the S2P. If you participate in Salary Exchange there may be an impact on your S2P entitlement. Please see page 8 of the guide ‘Your money, your choices – a guide to your contribution and investment choices’.
Note: If you are employed in the Channel Islands and are liable for Jersey Social Security contributions or Guernsey Social Insurance contributions, you are not eligible for membership of the UK State pension schemes. You will not build up entitlement to the UK basic and earnings-related State pensions. SPA in Jersey and Guernsey is 65 for men and women. State pensions on the Isle of Man are virtually identical to those in the UK.
You can find out more about State benefits, including changes to the SPA and how to get a forecast of your personal entitlement, by visiting www.gov.uk/browse/working and following the ‘State Pension’ link.
Changes to ‘contracting out’ Previously, members could opt out of S2P by taking out an appropriate personal pension. Since 6 April 2012, it is no longer possible to contract out of S2P through a money purchase arrangement. If you were contracted out, you will have automatically been brought back into S2P from this date.
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Help and information Write to:
taff Pensions, Money Purchase Team S Aviva PO Box 3433 Surrey Street Norwich NR1 3GT
Telephone: 0800 046 6174 Fax:
01603 689 687
Email:
internal, staffmp external, avivastaffmp@aviva.co.uk
Website:
www.avivastaffpension.co.uk
If you would like financial advice, you should speak to a financial adviser. You can find a list of financial advisers in your area by visiting www.moneyadviceservice.org.uk/en/categories/financial-help-and-advice
This guide is intended as a summary of the benefits payable by the Scheme. Nothing in this guide or any other communication issued to you confers any entitlement to benefits in excess of those provided under the Rules of the Scheme. In the case of any discrepancy between the Rules and this guide, the Rules will prevail. All references to tax are based on the Trustee’s understanding of the position at the date of publishing this guide. Benefits and contributions are taxed at the rate and in the manner actually in force at the relevant time.
www.avivastaffpension.co.uk
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