Phil Villiers Pensions Communications Officer Pensions Services

1. Local Government Pension Scheme(Hampshire Pension Fund)2012 pensions briefing‘Your retirement choices’ Phil Villiers Pensions Communications Officer Pensions Services

3. Summary • What it costs • Your retirement choices • ‘When can I retire?’ • Paying extra contributions • Government proposals for change • Death-in service benefits - ‘to nominate or not to nominate’ • ‘What should I do now?’ - some suggested action points • Where can I get more information?

4. What it costs

5. What it costs • You pay a percentage of your pay…. • ....your employer pays too • ….(currently about 3 x what you pay) • Your contributions attract tax relief….. • …..so you pay less tax! • The scheme is ‘contracted out’….. • …..so you pay less NI! Example • Whole-time employee earning £16,000 per year: • 5.9% rate applies – so gross contribution = £78.67 per month • Monthly tax and NI savings =(£25.52) • So net cost to you = £53.15 per month

6. Your retirement choices

7. Your retirement choices Final salary benefits • Linked to final pay, not investment performance Pre-April 2008 service: • Pension: 1/80 x membership x final pay plus • Tax-free lump sum: 3/80 x membership x final pay Post-April 2008 service - introduction of ‘choice’: • Pension: 1/60x membership x final pay With no tax-free lump sum or • Can give up some pension for a tax-free lump sum: • £12 tax-free lump sum per £1 pension • Can take up to 25% x total pension fund value as tax-free lump sum

8. For example……….. • Mr/Mrs Member • joined scheme 1 April 1988 • retires at 65 on 31 March 2012 • 24 years’ whole-time membership • 20 years pre-April 2008 • 4 years post-April 2008 • final pay of £16,000

9. For example……….. • No pension given up for tax-free lump sum • Pension Pre-April 2008: 1/80 x 20 x £16,000 = £ 4,000 per year Post-April 2008: 1/60 x 4 x £16,000 = £ 1,066 per year = £ 5,066 per year • Tax-free lump sum: Pre-April 2008: 3/80 x 20 x £16,000= £ 12,000 • Give up £500 pension for tax-free lump sum • Pension £(5,066 less 500) = £ 4,566 per year • Tax-free lump sum Pre-April 2008 : 3/80 x 20 x £16,000 = £12,000 Pension given up: £500 pension x 12 = £ 6,000 = £18,000 • Take maximum tax-free lump sum • Pension = £ 3,900 per year • Tax-free lump sum= £26,000

10. For example……….. Basis Pension Tax-free lump sum 1. No pension given up £5,066 per year £12,000 for tax-free lump sum 2. Give up £500 pension £4,566 per year £18,000 for tax-free lump sum 3. Take maximum tax-free lump sum £3,900 per year £26,000

11. ‘When can I retire?’

12. When can I retire? • Normal retirement - age 65 • Benefits payable in full • Late retirement after age 65 • Benefits increased for late payment • Early retirement • from age 55*…but only below 60 with employer consent • *except ill-health benefits, which can be paid at any age • benefits based on completed membership and reduced for early payment, except • ‘85-year rule’ may apply if joined pre-1/10/2006 and ‘age + service’ = 85 • enhanced benefits if leaving on redundancy/efficiency or ill-health • Flexible retirement • with employer consent, draw benefits early but continue working • need to reduce pay (hours or grade) by at least 40%

13. ‘Please sir, can I have some more?’ – paying extra contributions

14. Paying extra contributions Two options available under scheme: • Additional regular contributions (‘ARCs’) • You buy a defined amount of additional pension • Additional voluntary contributions (‘AVCs’) • You invest in funds with Zurich or Prudential • At retirement you use your AVC fund to • buy extra pension and/or, • increase your tax-free lump sum • Both options - tax relief on contributions! • For more information, go to our website: • Current member • Increasing my benefits

15. Government proposals for change The Government has agreed a series of proposals with the Trade Unions A single set of changes to be implemented in April 2014 • Member contributions • contributions to increase for ‘higher-paid’ • some ‘lower-paid’ employees will pay less • option to pay 50% contributions for 50% of pension benefit • Normal pension age • to be linked to state pension age, minimum 65 • ‘Career average’ pension • ‘Career average’ • accrual rate of 1/49th • Protection for existing members • Career average benefits will only apply to future service • ‘Underpin’ for those within 10 years of retirement at age 65 in April 2012 We will advise you when the final changes are announced.

16. Death-in service benefits‘to nominate or not to nominate’

17. Death-in service benefits Lump sum death grant • 3 x final pay (not ‘whole-time equivalent’ for part-timer/term-timer) • Hampshire Pension Fund decide beneficiaries taking your wishes into account • So you need to complete a death grant ‘expression of wish’ form Widow’s/widower’s/civil partner’s pension • Paid to legal spouse/civil partner • You don’t need to complete an ‘expression of wish’ form for this benefit Nominated cohabiting partner’s pension • Only paid if certain conditions satisfied: • You must complete a special ‘nomination’ form • ‘free to marry’/2 year qualifying period/financial interdependent or fully dependent Children’s pensions • Paid to ‘eligible children’ • in addition to any spouse/partner pension • no ‘expression of wish’ needed

18. What should I do now?Some suggested action points

19. What should I do now?Some suggested action points • It’s never too early to think about your pension…. • ….but it can be too late! • Pension v lump sum? • When do I want to retire? • ARCs or AVCs (or both!)? • Update death grant ‘expression of wish’? • Nominate cohabiting partner for pension? • Independent financial advice? • IFA Promotions at www.unbiased.co.uk

20. Where can I get more information? • Come and speak to me afterwards! • Employee guide • Website: • www.hants.gov.uk/finance/pensions • Pensions Services: • Email pensions@hants.gov.uk • Tel 01962 845588