Association of Anaesthetists of Great Britain and Ireland

Transcription

1 Association of Anaesthetists of Great Britain and Ireland 37 th Annual Linkman Conference Your Pension Arrangements Andrea Sproates Head of BMA Services

2 Who are BMA Services Service provided by AWD Chase de Vere - ALL welcome to attend seminars and briefings - Personal advice only provided to BMA members Largest Financial Advisory Group in Europe, owned by Swiss Life Committed to Independent Financial Advice Initial consultation at our cost with no obligation or charge Expert source of information and advice regarding NHS Benefits All Advisory Services available: - Mortgages and Financial Protection; - Investment and Retirement Planning; - Tax and Inheritance Planning.

3 Today s Agenda Understanding the impact of recent pension legislation changes - Lifetime Allowance - Annual Allowance - Retirement age - Private pension arrangements Proposed changes to the NHS Pension Scheme - How these will affect you and your colleagues Potential Follow up actions and next steps

4 Your NHS Pension Scheme Are you a member of the 1995 or the 2008 section? Lets look at the key facts in brief

5 The NHS Pension Scheme (1995 section)

6 Key Facts Final salary scheme for employed staff (officer) 1/80th pension accrual rate, 3/80th lump sum - i.e. Doctor retiring with 40 years service will have pension equal to half final pay Normal pension age 60 Minimum Pension age 50 (for those who were members on )

7 The NHS Pension Scheme (2008 Section)

8 Key Facts For new joiners from 1 April Or those who chose to transfer Matches 1995 scheme structure final salary for employed Pension age increased to 65 1/60th pension only accrual no automatic lump sum Minimum pension age 55

9 The New Pension Regime Legislation Changes and their Impact

10 The Key Basics Annual allowance reduced from 255,000 to 50,000 on 6th April Carry forward 3 years unused relief - Defined benefit Accrual rates increased from 10x to 16x Lifetime Allowance reduced from 1.8m to 1.5m on 6th April 2012 Minimum Pension age 55 More flexibility for private arrangements

11 Annual Allowance for Hospital Doctors

12 Annual Allowance - Officers Just what is 50,000? CPI is 5.2% Example: Member with 34 years service (beginning of the year) with salary of 94,911-34/80 x 94,911 = 40,337 x = 42,434 Following year 35 years service (end of the year) with increment to point 9-35/80 x 100,446 = 43,945

13 Annual Allowance One year s increase in pension benefit is 1,511 plus additional lump sum benefits of 7,074. Pension Accrual 1,511 x 16 24,176 Plus Lump Sum Benefit 4,533 TOTAL DEEMED CONTRIBUTION 28,709 Do not forget to include any private pension contributions in the calculation

14 What if I am buying added years? Example Dr A is buying 4 added years. She is age 55 and started the added years contract at age 35 She is a consultant with a bronze CEA The calculation is more complex CPI assumed to be 5.2%

15 Pension benefits at the start of the year 130,395 x 34/80 x (inflation proofing) = 58,299 Added years pension (4 x (20/25) x 130,395) x x 1/80 = 5,476 Lump sum 3 x (58, ,476) = 191,325 Pension Benefits at the end of the year 135,930 x 35/80 = 59,469 Added years pension (4 x (21/25) x 135,930) x 1/80 = 5,709 Lump sum 3 x ( 59, ,709) = 195,534

16 Example - continued Test against the annual allowance of 50,000 Total pension benefits at the beginning of the year 63,775 Less Total pension benefits at the end of the year 65,178 Increase in pension 1,403 x 16 = 22,448 Plus increase in lump sum 4,209 Total pension input over the year 26,657 Take care to include any private pensions contribution

17 Who is most likely to be affected? Members with long service and/or significant promotion or pay rise High earners Members retiring on (non terminal) ill health or redundancy grounds Members buying additional pension or added years Greater risk to all when inflation is low

18 Reduction to Lifetime Allowance

19 Key Date - 6 th April 2012 Implication - Result Taxation Reduction in total lifetime allowance from 1.8m to 1.5m - Any amount over the lifetime allowance will be liable for a tax charge. - 25% or 55% charge depending on whether surplus taken as an income or as a lump sum

20 The New Lifetime Allowance? How much have you actually built up towards the 1.5m? Example Member with 37 years service with 3 added years with salary of 135,930-40/80 x 135,930 = 67,965 x 20 = 1,359,300 - Lump sum of 3/80ths x 40 = 203,895 -TOTAL 1,563,195

21 A Possible Solution Flexibility of Lump Sum NHS Pension now allows members to obtain a larger lump sum than the standard 3 x pension This is approximately 5.36 x pension with an overall limit of 25% of the current lifetime allowance ( 375,000) 12 lump sum for each 1 of pension sacrificed

22 Option One Pension 67,965 x 20 1,359,300 Option Two Pension 60,000 x 20 1,200,000 Plus tax free cash 203,895 Total value 1,563,195 Minus Lifetime All 1,500,000 Surplus 63,195 Plus tax free cash 203,895 Plus extra tax free cash 95,580 Total Value 1,499,475 Minus Lifetime All 1,500,000 Deficit -525 Equivalent Lifetime Allowance Charge to pay 34,757 Lifetime Allowance Charge NIL

23 What if you have a private arrangement? Pension 67,965 x 20 1,359,300 Plus tax free cash 203,895 Plus personal pension 150,000 Pension 54,599 x 20 1,091,980 Plus tax free cash 203,895 Plus extra tax free cash 160,397 Plus personal pension 150,000 Total value 1,713,195 Minus Lifetime All 1,500,000 Surplus 213,195 Total Value 1,606,272 Minus Lifetime All 1,500,000 Surplus 106,272 Lifetime Allowance Charge to pay 117,257 Equivalent to 55% Lifetime Allowance Charge to pay 58,449 Equivalent to 55%

24 Other Potential Solutions Early retirement actuarial penalty Allocation of pension to a dependant

25 Fixed Protection Those with savings above 1.5 million or who believe the value of their pension pot will rise to above this level through investment growth without any further contributions or pension savings, were able to apply for a new personalised lifetime allowance of 1.8 million, providing they ceased accruing benefits in all registered pension schemes before 6 April Notifications in writing for this must have been received on the prescribed form by HMRC by 5 April Extreme care needed if you are still an active member of the NHSPS and have applied for Fixed Protection Those with existing primary or enhanced protection are expected to retain this. care still needed

26 Auto Enrolment Take care if you have Enhanced or Fixed protection AND you have opted out of the NHS Pension scheme At some point you will be automatically enrolled into an employers pension scheme - The date is determined by the size of your employing trust - The largest employers must act first If you do not opt out within one month your protection will be lost You will be subject to the Standard Lifetime Allowance at the point of your retirement and protection is lost.

27 Flexibility Your private arrangements

28 Annuity Purchase abolished for some Confirmed in 2011 Draft Finance Bill 9 th December 2010 For those with private arrangements no compulsion to purchase an annuity at any age Introduction of Flexible Drawdown Change to taxation on death increased from 35% to 55%

29 Pension Drawdown If minimum guaranteed income of 20,000 per year If minimum guaranteed income less that 20,000 per year Income can be occupational pension, state pension, annuity income Unsecured pension income excluded 25% tax free cash can be taken Remaining fund can be withdrawn in full Further withdrawals taxed at marginal rate of income tax Annual allowance reduced to nil (no further tax relievable pension contributions can be made) 25% tax free cash can be taken Remaining fund to be taken as an income as required Maximum annual withdrawal 100% of annuity rates (currently 120%) Maximum withdrawal to be reviewed every three years up to age 75 (currently five years). Will be determined annually post age 75

30 What are the proposed public sector pension scheme changes and how will they affect you? Expected Implementation date 1 st April 2015

31 Proposals 1/54 Career Average Revalued Earnings (CARE) scheme Revaluation of active members benefits by CPI + 1.5% Normal pension age linked to State Pension Age - Transitional (full) protection of NPA and current accrual for anyone within 10 years of current NPA on 1 April Tapering protection for those within 13.5 years of their current NPA i.e. delayed switch to new scheme Increased contributions Commitment to allow members who are TUPE d* out to remain in the NHSPS *Transfer of Undertakings Protected Employment

32 Transitional (full) Protection Applies to members who are within 10 years of their current normal pension age on 1 April 2012: 1995 section over age section over age section MHOs over age 45 Full protection of current normal pension age and method of accrual N.B. contribution increases still apply

33 Tapering (partial) protection Applies to members who are between 10 and 13.5 years of their current normal pension age on 1 April 2012: 1995 section age 46.5 and over 2008 section age 51.5 and over 1995 section MHOs age 41.5 and over Tapering protection delays the date at which you join the new scheme loss of 2 months protection for each month in excess of 10 years from NPA

34 Tapering protection date of change Years to Normal Retirement Age Date of switch to new scheme 13.5 and over 01/04/ /04/ /04/ /04/ /04/ /04/ /04/ Full protection

35 Accrued benefits All accrued benefits (pension and lump sum) earned up to 1st April 2015 would be protected Hospital doctors would keep their accrued 80ths or 60ths and these would be based on actual final pensionable pay at retirement These benefits can be taken from current normal pension age Option to pay additional contributions to fund early retirement of up to 3 years early without penalty (earliest age 65) What happens if you still want the option to retire at age 60?

36 Additional Benefits Death in service, death in retirement and survivors pensions will remain the same Ill health retirement for tier two awards - Enhancement 50% of prospective service to NRA - Currently 66% of prospective service to NRA

37 Choice exercise Option to transfer from 1995 to 2008 scheme finalised. Government recognised that those not covered by full protection may wish to change their retirement plans and retire later Second choice to transfer will therefore be offered - For service up to On the same terms as originally agreed Those with full protection in the 1995 scheme and those who have already transferred will not have another choice opportunity

38 Summary Benefits of BMA Services The Pension basics 1995 and 2008 sections Understanding the impact of recent pension legislation changes Proposed changes to the NHS Pension Scheme How these will affect you and your colleagues Do you feel you or your colleagues would benefit from advice? Would your department benefit from a local briefing?

39 Your views are important

40 Questions?

41 Important Information If you are unsure of the suitability of this presentation to your circumstances please contact BMA Services, to introduce you to AWD Chase de Vere for independent financial advice to be provided. The levels and bases of, and reliefs from taxation are subject to change, and any changes might be applied retrospectively. The Financial Services Authority does not regulate trust advice, tax advice, will writing or offshore investments. Issued by AWD Chase de Vere Limited. AWD Chase de Vere Limited (registered in England Number ) is a wholly owned subsidiary of AWD Group plc and is authorised and regulated by the Financial Services Authority. AWD Group plc is a member of AWD Holding AG, one of Europe's largest financial advice groups. Registered office: 60 New Broad Street, London, EC2M 1JJ. VAT Registration Number BMA Services is a trading name and trademark of the British Medical Association. The British Medical Association is an introducer appointed representative of AWD Chase de Vere Limited who are independent financial advisers, authorised and regulated by the Financial Services Authority, licensed to use the BMA Services trademark and trading name.