Your Future – a guide to your benefits
for members of the money purchase section of the RAC (2003) Pension Scheme (the Scheme)
Contents:
1
Your Future – when you retire
2
– protecting your dependants 8
– if you leave
6
– State pension
Staff Pensions, Money Purchase
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September 2014
Important changes to the RAC (2003) 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 - when you retire 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. 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.
Former final salary (now known as the defined benefits section) members On 1 April 2011, the defined benefits sections (including Flexiplan) of the Scheme were closed to future accrual. Former members of these sections may have protection for some of their benefits. For more information please read the supplement for your section which is available under the protected DB benefits tab at www.avivastaffpension.co.uk
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Former money purchase members On 30 September 2011, when the RAC Business was sold to the Carlyle Group, most active employees were transferred to a Carlyle Group pension scheme. That means they became deferred members of the RAC Scheme. Only a few active members in the Scheme remain: these are employees who moved jobs internally from RAC to Aviva operations before the sale and so remained with Aviva. For more information about being a deferred member of the Scheme, visit the deferred members section on www.avivastaffpension.co.uk
At a glance… • Your target retirement date is age 65, 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). • Your pension account is used to buy a pension at retirement. You can also provide benefits for your dependants. • 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. The final value of your pension 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 pension 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 age 65. If you want to choose a different target retirement age, you can do this by visiting Pension Tracker at www.aviva.co.uk/controlyourpension or by filling in an Investment Choices form available from your library at www.avivastaffpension.co.uk
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? You may receive an immediate ill-health pension if you, at any age, are suffering from a physical or mental incapacity that: • p revents you from following any employment with your Employer or any other Employer participating in the Scheme; • is likely to be permanent, and • you leave service because of this. The Trustee will also need to obtain evidence that you are suffering from a physical or mental impairment which prevents (and will continue to prevent) you from carrying on your occupation.
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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.
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 dependants, no benefits will be payable to them under the Scheme on your death. Further details of these options will be provided before you retire. 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).
www.avivastaffpension.co.uk
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Your Future - if you leave If you leave the Scheme before retirement, the following options will be available to you, depending on your length of pensionable service.
At a glance… • Y our benefit options on leaving vary, depending on how long you have been a Scheme member.
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 the Scheme’s normal retirement date.
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.
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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Your Future - protection for your dependants when you die 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.
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.
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:
If you die after retirement:
• f our times your annual pensionable salary at the date of your death; or
• Your dependants may be entitled to a lump sum or pension, if you chose this option at retirement.
• t he value of the part of your accumulated pension account attributable to your Employer’s contribution credits; plus
REMEMBER Don’t forget to complete a Nomination form and keep it up to date.
Active members of the defined benefits sections (including Flexiplan) 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
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• the value of your own contributions to the Scheme, including any paid under Salary Exchange. 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. A Nomination form can be requested from the Staff Pensions, Money Purchase Team (see page 15), or downloaded from your library section on www.avivastaffpension.co.uk
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 meets criteria laid down by the Company and the Trustee, from time to time. 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, from time to time. The Trustee will decide on your death whether the person you have nominated meets these criteria. 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.
REMEMBER If you do not complete a Nomination form and are not married or in a civil partnership at the date of death, no pension will be payable on your death.
www.avivastaffpension.co.uk
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Your Future - protection for your dependants when you die (continued) 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 download a Nomination form from your library section at www.avivastaffpension.co.uk/money-purchase. Alternatively, you can request a Nomination form from the Staff Pensions, Money Purchase Team (see page 15). It is important you keep the form up to date if your personal circumstances change.
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.
REMEMBER The person you nominate will be asked to provide evidence that he or she satisfies the applicable criteria at the date of death.
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www.avivastaffpension.co.uk
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Your Future - S tate 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.
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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
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 11 of the guide ‘Your money, your choices – a guide to your contribution and investment choices’.
Changes to ‘contracting out’ Previously, members could opt out of S2P by taking out an appropriate personal pension. However, from 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.
REMEMBER Don’t forget to complete a Nomination form and keep it up to date.
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.
www.avivastaffpension.co.uk
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Help and information Write to: Staff Pensions, Money Purchase Team, Aviva, PO Box 3433, Surrey Street, Norwich, NR1 3GT Tel:
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
www.avivastaffpension.co.uk
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