FOCUS ON PREPARING FOR RETIREMENT

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1 HEALTH WEALTH CAREER FOCUS ON PREPARING FOR RETIREMENT October 2016

2 FOCUS ON PREPARING FOR RETIREMENT WHAT IS RETIREMENT? INCOME WORK RETIREMENT DEATH MERCER

3 WHAT MIGHT YOUR SPENDING LOOK LIKE IN RETIREMENT? MERCER

4 TYPES OF RETIREMENT BENEFIT MERCER MERCER

5 TYPES OF RETIREMENT BENEFIT Defined Benefit (DB) Defined Contribution (DC) MERCER

6 TYPES OF RETIREMENT BENEFIT Final Salary (FSAL) or Career Revalued Benefits Section (CRB) Statements of benefits at 31 March 2016 in Autumn 2016 pension increases MERCER

7 TYPES OF RETIREMENT BENEFIT Salary threshold 55, Retirement Income Builder (DB) Investment Builder (DC) Automatic for salaries of 55,000 and over With the option to make voluntary contributions and choose the match Salary 000s Apr Oct 2016 Retirement Income Builder (DB) With the option to make voluntary contributions to the Investment Builder and choose the match MERCER

8 TYPES OF RETIREMENT BENEFIT Standard Benefits Additional Voluntary Contributions (AVCs) Final Salary Benefits If joined before 1 October 2011 or Career Revalued Benefits (CRB) If joined from 1 October 2011 Added years/benefits no new arrangements 1 Apr 2016 Retirement Income Builder on earnings up to the salary threshold from 1 October 2016 Investment Builder on earnings above the salary threshold from 1 October 2016 Prudential AVCs most cease from October 2016 Investment Builder MERCER

9 TYPES OF RETIREMENT BENEFIT Final Salary Benefits 1/80 x service x final pensionable salary (both at 31 March 2016) (where service includes Added years) plus pension increases up to retirement or Career Revalued Benefits (CRB) plus Retirement Income Builder 1/80 x pensionable salary each year (up to 31 March 2016) (plus Added benefits) plus pension increases in respect of each year up to retirement 1 Apr /75 x pensionable salary each year (up to salary threshold from 1 October 2016) plus pension increases in respect of each year up to retirement = Annual Pension MERCER

10 TYPES OF RETIREMENT BENEFIT PLUS Tax free lump sum One off payment of 3 times the annual pension MERCER

11 TYPES OF RETIREMENT BENEFIT Standard package Annual pension plus 3 times the pension as a tax free cash lump sum Option 1: take LESS tax free cash And receive a higher pension in lieu of the cash Option 2: take MORE tax free cash And receive a lower pension in lieu of the extra cash current maximum tax free cash is 25% of the value of all your benefits as set by HMRC Conversion of pension to cash and vice versa is via a commutation factor MERCER

12 TYPES OF RETIREMENT BENEFIT PLUS Prudential AVCs plus = Defined contribution (DC) pot of money Investment Builder Flexibility of what to do with the cash sum potentially take as tax free cash! MERCER

13 TYPES OF RETIREMENT BENEFIT Annual pension Tax free cash Defined contributions (DC) Payment of retirement benefits Pension increases Death after retirement MERCER

14 EXAMPLE MEMBER MERCER MERCER

15 EXAMPLE MEMBER Pat is 60 and joined 16 years ago Pat has a final pensionable salary of 50,000 at 31 March 2016 Pat wants to retire at age 65 Pat also wants to save an additional 1% Pat has 12,600 with Prudential AVCs MERCER

16 EXAMPLE MEMBER Final Salary Benefits Build up pension increases Pension 1/80 x 50,000 x 16 5 years 11,200 pa plus Retirement Income Builder Pensionable salary Build up pension increases Pension from year 52,000 1/75 x 52,000 4 years ,000 1/75 x 55,000 3 years ,000 1/75 x 55,000 2 years ,000 1/75 x 55,000 1 year ,000 1/75 x 55, ,800 pa Total annual pension 15,000 pa PLUS Tax free lump sum (3 x 15,000) 45,000 MERCER

17 EXAMPLE MEMBER Investment Builder earnings above the salary threshold 8% 12% Salary Pat contributes (from gross earnings) Employer contributes Banked 52,000 8% x 0 12% x ,000 8% x 0 12% x ,000 8% x ( 56,000-55,000) 12% x ( 56,000-55,000) ,000 8% x ( 58,000-55,000) 12% x ( 58,000-55,000) ,000 8% x ( 60,000-55,000) 12% x ( 60,000-55,000) 1,000 Total in Investment Builder: 1,800 (excludes any investment returns) MERCER

18 EXAMPLE MEMBER Investment Builder the match (voluntary contribution) 1% 1% Salary Pat contributes (from gross earnings) Employer contributes Banked 52,000 1% x 52,000 1% x 52,000 1,040 55,000 1% x 55,000 1% x 55,000 1,100 56,000 1% x 56,000 1% x 56,000 1,120 58,000 1% x 58,000 1% x 58,000 1,160 60,000 1% x 60,000 1% x 60,000 1,200 Total in Investment Builder: 5,600 MERCER

19 TYPES OF RETIREMENT BENEFIT Defined contribution benefits Prudential AVCs plus Investment Builder Prudential AVCs 12,600 Investment Builder (earnings above salary threshold) 1,800 Investment Builder (the match ) 5,600 Total DC pot of money 20,000 MERCER

20 OPTIONS AVAILABLE ON RETIREMENT MERCER MERCER

21 OPTIONS AVAILABLE ON RETIREMENT Estimated benefits at retirement Standard benefits Total annual pension 15,000pa PLUS Tax free lump sum (3 x 15,000) 45,000 PLUS Total DC pot of money 20,000 45,000 15,000 pa 20,000 Annual pension Tax free cash Defined contributions (DC) MERCER

22 OPTIONS AVAILABLE ON RETIREMENT Estimated benefits at retirement Standard benefits no DC pot Maximum tax free cash sum estimated to be 86,250 45,000 15,000 pa Annual pension Tax free cash Defined contributions (DC) MERCER

23 OPTIONS AVAILABLE ON RETIREMENT Estimated benefits at retirement Option 1: LESS tax free cash Maximum tax free cash sum estimated to be 86,250 Commutation factors 45,000 Male age Female age ,500 pa 15,000 pa Annual pension Tax free cash Defined contributions (DC) MERCER

24 OPTIONS AVAILABLE ON RETIREMENT Estimated benefits at retirement Option 2: MORE tax free cash Maximum tax free cash sum estimated to be 86,250 86,250 45,000 Commutation factors Male age Female age ,000 12,700 pa Annual pension Tax free cash Defined contributions (DC) MERCER

25 OPTIONS AVAILABLE ON RETIREMENT Estimated benefits at retirement Using the DC pot as tax free cash Maximum tax free cash sum estimated to be 91,250 45,000 15,000 pa 20,000 Annual pension Tax free cash Defined contributions (DC) MERCER

26 OPTIONS AVAILABLE ON RETIREMENT Estimated benefits at retirement Using the DC pot as tax free cash Maximum tax free cash sum estimated to be 91,250 20,000 45,000 15,000 pa Annual pension Tax free cash Defined contributions (DC) MERCER

27 OPTIONS AVAILABLE ON RETIREMENT Estimated benefits at retirement Using the DC pot as tax free cash Maximum tax free cash sum estimated to be 91,250 91,250 65,000 15,000 13,500 pa Annual pension Tax free cash Defined contributions (DC) MERCER

28 OPTIONS AVAILABLE ON RETIREMENT Estimated benefits at retirement Other options for the DC pot 20,000 Transfer to another arrangement Convert into pension Take as cash from Leave funds invested 15,000 pa 45,000 Note: need to take DC benefits at the same time as main scheme benefits to get possibility of 100% tax free Annual pension Tax free cash Defined contributions (DC) MERCER

29 EARLY RETIREMENT (IN GOOD HEALTH) MERCER MERCER

30 EARLY RETIREMENT Normal Pension Age (NPA) of 65 Over 55 with 5 years service* (to take early retirement) Reduction for early payment (on average 4% a year) Some protections (for those age 55 or more on 1 October 2011) For more details on early retirement refer to factsheet Retirement at * criteria can be different on redundancy MERCER

31 EARLY RETIREMENT: REDUCTIONS MERCER

32 EARLY RETIREMENT: REDUCTIONS MERCER

33 EARLY RETIREMENT: REDUCTIONS Retirement from age 60 Contract of employer as at 30 September 2011 states age 60 Service period Reduction for each year and part year before age Male Female Pre 1 October 2011 No reduction No reduction Post 30 September Contract of employer as at 30 September 2011 states age 65 Service period Reduction for each year and part year before age Male Female Pre 17 May May 1990 to 31 March April 1995 to 30 September Post 30 September MERCER

34 EARLY RETIREMENT: REDUCTIONS Retirement from age 60 Contract of employer as at 30 September 2011 states age 60 Service period Reduction for each year and part year before age Male Female Pre 1 October 2011 No reduction No reduction Post 30 September Contract of employer as at 30 September 2011 states age 65 Service period Reduction for each year and part year before age Male Female Pre 17 May May 1990 to 31 March April 1995 to 30 September Post 30 September MERCER

35 EARLY RETIREMENT: REDUCTIONS Retirement from age 60 Contract of employer as at 30 September 2011 states age 60 Service period Reduction for each year and part year before age But, if you were Male Female Pre 1 October 2011 No reduction No reduction a member of at 30 September 2011 age 55 or more on 1 October 2011 and Post 30 September Contract of employer as at 30 September 2011 states age 65 Service period Reduction for each year and part year before age the University Male consents Female Pre 17 May May 1990 to 31 March then 1 April 1995 to 30 September Post 30 September MERCER

36 EARLY RETIREMENT: REDUCTIONS Retirement from age 60 Contract of employer as at 30 September 2011 states age 60 Service period Reduction for each year and part year before age Male Female Pre 1 October 2011 No reduction No reduction Post 30 September Contract of employer as at 30 September 2011 states age 65 Service period Reduction for each year and part year before age Male Female Pre 17 May May 1990 to 31 March April 1995 to 30 September Post 30 September MERCER

37 EARLY RETIREMENT: REDUCTIONS Retirement from age 60 Contract of employer as at 30 September 2011 states age 60 Service period Reduction for each year and part year before age Male Female Pre 1 October 2011 No reduction No reduction Post 30 September Contract of employer as at 30 September 2011 states age 65 Service period Reduction for each year and part year before age Male Female Pre 17 May May 1990 to 31 March April 1995 to 30 September Post 30 September MERCER

38 EARLY RETIREMENT: REDUCTIONS Retirement from age 60 Contract of employer as at 30 September 2011 states age 60 Service period Reduction for each year and part year before age If you weren t age Male 55 or more on 1 October 2011 Female Pre 1 October 2011 No reduction No reduction Post 30 September BUT Contract of employer as at 30 September 2011 states age 65 Service period Reduction for each year and part year before age the University Male consents Female Pre 17 May May 1990 to 31 March then 1 April 1995 to 30 September Post 30 September MERCER

39 EARLY RETIREMENT: REDUCTIONS Retirement from age 60 Contract of employer as at 30 September 2011 states age 60 Service period Reduction for each year and part year before age Male Female Pre 1 October 2011 No reduction No reduction Post 30 September Contract of employer as at 30 September 2011 states age 65 Service period Reduction for each year and part year before age Male Female Pre 17 May May 1990 to 31 March April 1995 to 30 September Post 30 September MERCER

40 EARLY RETIREMENT: REDUCTIONS Retirement from age 60 Contract of employer as at 30 September 2011 states age 60 Service period Reduction for each year and part year before age Male Female Pre 1 October 2011 No reduction No reduction Post 30 September Contract of employer as at 30 September 2011 states age 65 Service period Reduction for each year and part year before age Male Female Pre 17 May May 1990 to 31 March April 1995 to 30 September Post 30 September MERCER

41 EARLY RETIREMENT: REDUCTIONS Retirement before age 60 (earliest retirement age 55) Contract of employer as at 30 September 2011 states age 60 Service period Reduction for each year and part year before age Male Female Pre 1 October Post 30 September Contract of employer as at 30 September 2011 states age 65 Service period Reduction for each year and part year before age Male Female Pre 17 May May 1990 to 31 March April 1995 to 30 September Post 30 September MERCER

42 EARLY RETIREMENT: REDUCTIONS Retirement before age 60 (earliest retirement age 55) Contract of employer as at 30 September 2011 states age 60 Service period Reduction for each year and part year before age Male Female Pre 1 October Post 30 September Contract of employer as at 30 September 2011 states age 65 Service period But, if you were a member of at 30 September 2011 age 55 or more on 1 October 2011 Reduction for each year and part year before age Male Female then Pre 17 May May 1990 to 31 March April 1995 to 30 September Post 30 September MERCER

43 EARLY RETIREMENT: REDUCTIONS Retirement before age 60 (earliest retirement age 55) Contract of employer as at 30 September 2011 states age 60 Service period Reduction for each year and part year before age Male Female Pre 1 October Post 30 September Contract of employer as at 30 September 2011 states age 65 Service period Reduction for each year and part year before age Male Female Pre 17 May May 1990 to 31 March April 1995 to 30 September Post 30 September MERCER

44 EARLY RETIREMENT: REDUCTIONS Retirement before age 60 (earliest retirement age 55) Contract of employer as at 30 September 2011 states age 60 Service period Reduction for each year and part year before age Male Female Pre 1 October Post 30 September Contract of employer as at 30 September 2011 states age 65 Service period Reduction for each year and part year before age Male Female Pre 17 May May 1990 to 31 March April 1995 to 30 September Post 30 September MERCER

45 EXAMPLE MEMBER Pat is 60 and joined 16 years ago Pat has a final pensionable salary of 50,000 at 31 March 2016 Pat wants to retire at age 60 Pat has 12,600 with Prudential AVCs Pat does not have consent to retire early Contractual Pension Age (CPA) is 60 so can take pre 1 October 2011 benefits unreduced MERCER

46 EXAMPLE MEMBER Final Salary Benefits Period Build up Reduction Pension Pre 1 October /80 x 50,000 x 11.5 x 1 7,200 pa Post 30 September /80 x 50,000 x 4.5 x 0.8 2,300 pa Total annual pension 9,500 pa PLUS Tax free lump sum (3 x 9,500) 28,500 Defined contribution benefits Prudential AVCs 12,600 Total DC pot of money 12,600 MERCER

47 RETIREMENT AT 65 Estimated benefits at retirement Standard benefits Total annual pension 15,000 pa PLUS Tax free lump sum (3 x 15,000) 45,000 PLUS Total DC pot of money 20,000 15,000 pa 45,000 20,000 Retirement at 65 Annual pension Tax free cash Defined contributions (DC) MERCER

48 EARLY RETIREMENT AT 60 Estimated benefits at retirement Standard benefits Total annual pension 9,500 pa PLUS Tax free lump sum (3 x 15,000) 28,500 PLUS Total DC pot of money 12,600 15,000 9,500 pa 45,000 28,500 20,000 12,600 Retirement at 60 Annual pension Tax free cash Defined contributions (DC) MERCER

49 LATE RETIREMENT MERCER MERCER

50 LATE RETIREMENT Can remain in service after NPA (65) Choice of whether to cease contributions or not If cease, increase for late payment Must draw benefits before age 75 For more details on late retirement refer to factsheet Retirement at MERCER

51 EXAMPLE MEMBER Pat is 60 and joined 16 years ago Pat has a final pensionable salary of 50,000 at 31 March 2016 Pat wants to retire at age 70 Pat saves an additional 1% Pat has 12,600 with Prudential AVCs MERCER

52 RETIREMENT AT 65 Estimated benefits at retirement Standard benefits Total annual pension 15,000 pa PLUS Tax free lump sum (3 x 15,000) 45,000 PLUS Total DC pot of money 20,000 15,000 pa 45,000 20,000 Retirement at 65 Annual pension Tax free cash Defined contributions (DC) MERCER

53 LATE RETIREMENT AT 70 Estimated benefits at late retirement Standard benefits (assumes ceased contributions at age 65) Total annual pension 18,150 pa PLUS Tax free lump sum (3 x 15,000) 54,450 PLUS Total DC pot of money 20,000* 18,150 pa 15,000 pa 54,450 45,000 20,000 Retirement at 70 Annual pension Tax free cash Defined contributions (DC) MERCER 2016 *Assumes no investment return since age 65 53

54 LATE RETIREMENT AT 70 Estimated benefits at late retirement Standard benefits (assumes carry on contributing into the scheme) Total annual pension 22,000 pa PLUS Tax free lump sum (3 x 15,000) 66,000 PLUS Total DC pot of money 28,000 22,000 pa 18,150 pa 66,000 54,450 20,000 28,000 Retirement at 70 Annual pension Tax free cash Defined contributions (DC) MERCER

55 FLEXIBLE RETIREMENT MERCER MERCER

56 FLEXIBLE RETIREMENT Draw up to 80% of benefits as long as reduce hours by at least 20% Earliest age is 55 Need University consent Can flex twice before full retirement For more details on flexible retirement refer to factsheet Flexible retirement at MERCER

57 FLEXIBLE RETIREMENT EXAMPLE NEXT 5 YEARS INCOME STILL WORKING RETIRED!! 50:50 MERCER

58 STATE BENEFITS MERCER MERCER

59 STATE BENEFITS Normal Pension Age (NPA) of 65 NPA will rise in line with increases to the State Pension age (SPA) for men and women SPA will rise to 66 by October 2020 NPA will be 66 from this date ONLY affects service from that date MERCER

60 STATE BENEFITS Normal Pension Age (NPA) of 65 Normal Pension Age (NPA) in is not necessarily the same NPA will rise in line with increases to the State Pension age (SPA) for men and women as your State Pension Age SPA will rise to 66 by October 2020 (SPA) NPA will be 66 from this date ONLY affects service from that date MERCER

61 STATE BENEFITS MERCER

62 STATE BENEFITS MERCER

63 STATE BENEFITS MERCER

64 STATE BENEFITS The full new State Pension is per week Deduction for being contracted-out before 6 April 2016 MERCER

65 STATE BENEFITS MERCER

66 WHAT TO DO AND WHERE TO GET HELP MERCER MERCER

67 QUOTATIONS OF BENEFITS Illustrative benefit projections Quotations of retirement benefits MERCER

68 QUOTATIONS OF BENEFITS MERCER

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80 ENQUIRIES MERCER

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82 ADVICE Pensions Advisory Service General guidance on pensions pensionsadvisoryservice.org.uk Money Advice Service For general financial guidance including pensions moneyadviceservice.org.uk Pension Wise New government site focussed on defined contribution pension saving pensionwise.gov.uk Independent Financial Advisers Look for chartered advisers only unbiased.co.uk, findanadviser.org MERCER

83 FURTHER INFORMATION: HELP YOURSELVES MERCER

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