PENSION SCHEME OLD BENEFITS ADDITIONAL BENEFITS HANDBOOK

Transcription

1 PENSION SCHEME OLD BENEFITS ADDITIONAL BENEFITS HANDBOOK

2 Introduction If you want to boost your pension benefits you can do so by paying extra contributions which are deducted from your gross salary before tax. You get the benefit of tax relief on these contributions. The BBC Pension Scheme (the Scheme) has two arrangements for Old Benefits members. They are: Added Years, and Additional Voluntary Contributions (AVCs). About this booklet This booklet explains how Old Benefits members of the Scheme can purchase additional benefits by paying extra contributions. It is intended only as guidance and should be read in conjunction with the BBC Pension Scheme Old Benefits Handbook. The definitive provisions of the Scheme are set out in the Trust Deed and Rules, which supplement and override this handbook and the Old Benefits Handbook in the event of any difference. Some of the terms used (e.g. pensionable salary) have a particular meaning and are in bold type wherever they appear in the text. There is an explanation of the terms used on page 17.

3 Contents Section Added Years Additional Voluntary Contributions (AVCs) Help Explanation of Terms Pages

4 Added Years What are the benefits? Every Added Year you buy increases your pension at age 60 by 1/60th of your final pensionable salary and qualifies in full for pension increases and dependants benefits. The BBC makes a substantial contribution towards the cost of buying Added Years. How much does it cost? The table opposite shows the current additional contribution needed to buy each Added Year. It is expressed as a percentage of your pensionable salary. Deductions continue for a complete number of years, ending in the 12 months before your 60th birthday. The contribution rates are set by the Trustees, with the consent of the BBC, and are subject to review. Janet is currently 40 years old. When she retires on her 60th birthday, she will have 30 years pensionable service. She decides to buy 10 Added Years. Her current final pensionable salary is 30,000 p.a. Her annual pension on retirement, at present values, will be: 30/60 x 30,000 = 15,000 (scale pension) 10/60 x 30,000 = 5,000 (Added Years) Total pension = 20,000 p.a. 2

5 Age next birthday at start of contributions Contribution rate to purchase one Added Year Age next birthday at start of contributions Contribution rate to purchase one Added Year * * * * * * * * see are there any limits on page 4 3

6 Are there any limits? You can buy up to a maximum of 10 Added Years, subject to the following: your total pensionable service plus Added Years plus credits at age 60 cannot exceed 40 years; your total pension, including benefits from other schemes, cannot exceed two-thirds of your final pensionable salary; your basic contributions plus your Added Years contributions and any AVCs cannot exceed 15% of your pensionable salary. *These rates are likely to restrict or prevent members starting to buy Added Years as they get closer to their 60th birthday If you cannot complete 10 years actual service by the time you are 60 you may not be able to buy the full 10 years. You will be told whether this limit affects you when you submit your application. How do I apply? Decide how many Added Years you want to buy and work out how much it will cost using the contribution table on page 3. Part years may only be purchased when you apply to buy the maximum allowable years and days. To start buying Added Years, you should: call the pension service line on (internal) or (external); mypension@bbc.co.uk; write to the Pension and Benefits Centre, Broadcasting House, Cardiff CF5 2YQ. You will be sent a letter confirming the start date of your purchase. Check your payslip to see whether deductions have started and let the Pension and Benefits Centre know if they have not. 4

7 Added Years can be purchased through Smart pensions. This allows you to save money through reduced National Insurance contributions. More information on Smart pensions is available at bbc.co.uk/mypension. Can I change my contributions? Subject to notice and Scheme limits, you can increase, decrease or stop your purchase of Added Years. To do so, you should contact the pension service line, detailing your changes: call the pension service line on (internal) or (external); mypension@bbc.co.uk; or write to the Pension and Benefits Centre, Broadcasting House, Cardiff CF5 2YQ. Please note that a change will be treated as starting a new purchase of Added Years. What happens if I leave the Scheme or claim my pension? If you leave active membership of the Scheme before you are 60, you will be credited with the exact proportion of Added Years you have purchased. The benefit will be included in your deferred pension and will qualify for pension increases and dependants benefits. If your pension is paid before you are 60, it will include your Added Years benefit reduced to reflect early payment. What happens if I die in pensionable service? Your Added Years will be treated as having been paid in full, and the benefit will be included in any pension payable to your dependant(s). Furthermore, your contributions plus interest will be refunded. 5

8 AVCs AVCs enable you to improve your pension benefits, and take advantage of tax concessions that are not available to many other forms of saving. The money you save is invested in your name to provide a fund that can be used to purchase additional benefits. You should consider contributing to AVCs if: you have non-pensionable earnings e.g. overtime or an Unpredictabillity Allowance (UPA); your Scheme pension at age 60 will be less than two-thirds of your final pensionable salary; you intend to take your pension early; or you would like to maximise tax-free cash and pension benefits at retirement. If you are in receipt of qualifying earnings, the BBC will also contribute towards these extra benefits. It does so by matching your savings, currently on a 1 for 1 basis, up to 15% of your qualifying earnings. This money is invested separately in a fund in your name. The BBC does not contribute to any AVC arrangements outside the Scheme. AVCs can be made through Smart pensions. This allows you to save money through reduced National Insurance contributions. More information on Smart pensions is available at bbc.co.uk/mypension. Your AVCs are flexible benefits in addition to your defined benefit Scheme pension. For more information about your Scheme pension: visit bbc.co.uk/mypension; mypension@bbc.co.uk; or call the pension service line on (internal) or (external). The normal pension age of the Old Benefits section is age 60. The value of your flexible benefits is likely to be lower if you access your benefits before normal pension age. 6

9 What are the benefits of paying AVCs? When you take your pension, AVCs are used in accordance with your wishes subject to Scheme limits, to top-up the benefits you get from the Scheme. The options currently available include: maximising your tax-free cash entitlement; buying more pension, either with the Scheme or an insurance company; a combination of tax-free cash and pension. Alternatively, you can choose to transfer some or all of your AVCs to another registered pension arrangement before your pension starts. Where is my money invested? The Scheme currently offers two investment choices for AVCs. The Trustees reserve the right to review and vary these arrangements and to change providers (including switching funds). Santander Your contributions are held on deposit and earn tax-free interest calculated on a daily basis, which is added to your fund half-yearly on 30 June and 31 December. A statement showing the value of your fund is sent to you annually. Changes in the interest rate are published at bbc.co.uk/mypension. You can get further information by ringing the Santander helpline on

10 Fidelity Pensions Management Ltd You can invest your contributions in one or more funds. If you choose the Working Life Strategy fund, Fidelity will manage the investment for you. Alternatively, you can take a more active part in managing the investment of your contributions by choosing from the remaining funds. Contributions to Fidelity s funds are used to buy units which are effectively shares in the funds. The value of units can fall as well as rise in line with the value of the investments held in a particular fund. If you are interested in finding out more about Fidelity s investment options, you can call their helpline on or visit their website fidelitypensions.co.uk and request details of the funds available to Scheme members. What can I pay? You can pay AVCs on both your pensionable salary and non-pensionable earnings. However, in any tax year: taken together, your basic contributions, any Added Years and AVCs cannot exceed 15% of your pensionable salary; you cannot contribute more than 15% of your non-pensionable earnings; overall you cannot contribute more than 15% of the Scheme earnings cap. Your total benefits on retirement cannot exceed Scheme limits. If this is likely, the Trustees will restrict your contributions. You can also split your AVCs between providers. 8

11 Does the BBC pay contributions? However you split your own contributions, the BBC will automatically match them 1 for 1 up to 15% of any qualifying earnings that you receive to the end of each financial year. The BBC contributions will be invested in the same way as you split your contributions and will only match contributions on qualifying earnings (see below). What are qualifying earnings? The earnings that currently attract BBC matching contributions are: Everyone Monthly paid only Weekly paid only Overtime Unpredictability allowance (UPA) Saturday and Sunday payments Additional Days payments Premium rates Penalty payments Night payments Protected continuing allowances Other actuality payments Public and BBC holidays SFS allowance Part time cleaner bonus Acting pay Shift allowance (Catering) Extra responsibility reward Temporary London Weighting Hours over 12 Less than 10 hours break 9

12 How do I apply? Having decided the rate at which you wish to contribute, based on your pensionable salary and/or your non-pensionable earnings, you can: call the pension service line on (internal) or (external); mypension@bbc.co.uk; write to the Pension and Benefits Centre, Broadcasting House, Cardiff CF5 2YQ. You will be sent a letter confirming the start date of your contributions. Check your payslip to see whether deductions have started and let the Pension and Benefits Centre know if they have not. Can I change my AVCs? Subject to notice, you can change or stop your contributions by calling the pension service line on (internal) or (external) or by ing mypension@bbc.co.uk. To switch between Fidelity funds, you should telephone their helpline on or switch using Fidelity s PlanViewer at fidelitypensions.co.uk. If you would like to switch funds between providers, you should be aware that penalties may apply. For further information, call the pension service line on (internal) or (external). 10

13 Can I transfer my AVCs away from the Scheme? You can transfer all or some of your AVCs to one or more registered pension arrangements in the UK or overseas. You would need to specify the percentage of your AVCs that you want to transfer and not a monetary amount. Only one partial transfer is permitted in any three month period but you can transfer all your remaining AVCs at any time before your pension starts. As an active member, you can continue to pay AVCs following a transfer. Different pension providers offer different options in relation to what you can do with flexible benefits, including the option to select an annuity. Different options have different features, different rates of payment, different charges and different tax implications. There may be tax implications associated with accessing flexible benefits. Pension income is taxable and the rate at which income from a pension is taxable depends on the amount of income you receive from your pension and other sources. Pension Wise is a new service from the Government that offers free and impartial guidance to help you to understand the options you have and to help you think about how to make the best use of your pension savings in relation to flexible benefits such as your AVC funds. You should obtain guidance from Pension Wise and consider taking independent advice to help you with this decision. Pension Wise offers you tailored guidance either online, over the telephone or face to face. You can contact Pension Wise at pensionwise.gov.uk or by calling between 8am and 10pm. 11

14 What if I opt out or leave the Scheme? If you opt out or leave service, your AVCs stop automatically. If you elect to take a deferred pension and do not transfer your AVCs to another registered pension arrangement, your AVCs will continue to be invested until your Scheme pension becomes payable. At that time, they may be used to provide tax-free cash, additional pension in the Scheme or an annuity with an insurance company. If you wish, you can transfer your pension benefits to another registered pension arrangement. You can transfer: all your benefits (main Scheme pension and AVCs); just your AVCs; or a percentage of your AVCs. What happens if I die before I take my pension? Should you die before your pension comes into payment, your accumulated AVCs will be paid to your beneficiaries in the same way as any other lump-sum benefit due from the Scheme. What are my options when I take my pension? Tax-free cash When you claim payment of your pension, you are entitled to take part of your pension benefits as a one-off tax-free cash lump sum. You can use your AVCs to provide your tax-free cash lump sum entitlement and avoid you having to exchange as much of your main Scheme pension for a cash lump sum. The maximum cash you can take is 25% of the value of your pension benefits, including any AVCs. 12

15 Buying more pension When the time comes for you to take your Scheme pension, you will be able to use your AVCs to buy more pension for you and your dependants. This is done by either buying additional Scheme pension or an annuity with an insurance company. Any additional Scheme pension you buy is treated in the same way as your normal Scheme pension. For example, it includes a spouse s, civil partner s or nominated dependant s pension of two-thirds your pension, it is guaranteed for five years and attracts the same increases as other elements of your pension in payment. Transfer your AVCs You can transfer your AVCs to another pension arrangement before your pension starts. See page 11 details. Are there any limits? The Scheme has limits on the amount of benefit it can pay. If the level of your AVCs look likely to result in your Scheme benefits exceeding those limits, the AVCs you can make will be restricted. In addition, there are two allowances that limit the total value of pension benefits you can build up across all registered schemes of which you are a member without incurring additional tax liabilities. The allowances do not affect many people. The following is based on the Trustees understanding of the allowances. 13

16 The Annual Allowance This limits the contributions and/or benefits that you can build up each year without additional tax charges. If your benefits build up by more than your available Annual Allowance (including any carried forward from previous years) the excess is taxed at your marginal rate. In certain circumstances there will be an option for you to elect that the Scheme pay annual allowance tax charge on your behalf with a deduction applied to you benefits. As well as paying AVCs (see page 6) to the Scheme up to certain limits, you can currently also pay into LifePlan, or a personal pension of your own choice, to further boost your pension savings. You will have to make your own arrangements if you want to pay into a personal pension. You will normally be able to pay up to 100% of your UK earnings towards your pension and receive tax relief at your marginal rate. However, your contributions and benefits will be tested against the Annual Allowance. The amount tested from April 2011 is: the amount by which any defined benefit pensions (e.g. your Scheme pension) have increased in excess of Consumer Prices Index (CPI), multiplied by a factor of 16; and the value of any contributions you or your employer have paid to a defined contribution pension (e.g. AVCs to the Scheme, or contributions to LifePlan or a personal pension). Any contributions paid or benefits built up above the Annual Allowance, which is currently 40,000, will be taxed as income at your marginal rate and the charge will be determined through the annual self-assessment tax return process. A tapered Annual Allowance was introduced from 6 April 2016 for individuals with income over 150,000 (including pension savings). For every 2 of income over 150,000, the Annual Allowance will be reduced by 1, down to a minimum of 10,000 a year. The tapered Annual Allowance will not apply if an individual s income is less that 110,000 a year (excluding all pension savings). For more information on the Annual Allowance visit gov.uk/tax-on-your-private-pension/annual-allowance. 14

17 The Lifetime Allowance This is an overall limit on the value of pension benefits you can build up across all types of registered pension schemes without additional tax charges. When your Old Benefits pension comes into payment, its capital value (calculated by multiplying your initial annual pension by a factor of 20) plus any lump sum must be checked against your remaining Lifetime Allowance. Each time you take benefits from a scheme your remaining Lifetime Allowance will be reduced. The value of benefits which exceed your remaining Lifetime Allowance will be subject to a one-off tax charge of 55% if taken as a lump sum, or 25% if taken as a pension since the pension is also subject to income tax. These one-off tax charges can be paid by the Scheme when your benefits are put into payment with a corresponding adjustment to your pension. If you think you may be affected by the Lifetime Allowance, you should consider seeking specialist pension advice, 15

18 Where can I get help? The in-house Pension and Benefits Centre offers prompt help on everything to do with the Scheme. Our pension service line is available from 8.30 to 17.00, Monday to Friday on: Phone: (external), or (internal) Post: Operations and Communications Manager Pension and Benefits Centre Broadcasting House Cardiff CF5 2YQ mypension@bbc.co.uk We aim to deal with 95% or more of all cases within best-practice times for the pensions industry. When there is a delay, we will let you know and keep you informed of progress. Under the terms of the Financial Services and Markets Act 2000, neither we nor the Trustees are authorised to give you financial advice. However, we will give you the information you need to get independent financial advice and to help you make your own decisions. We welcome suggestions for improving the service that we offer. 16

19 Explanation of terms These terms are in bold type wherever they appear in this handbook. Final pensionable salary Your pensionable salary in the last year, calculated on a daily rate, before your pensionable service ends. Non-pensionable earnings Earnings on which you do not automatically pay pension contributions e.g. Unpredictability Allowances (UPA) or overtime. Pensionable salary In any Scheme year, your basic pay including any other earnings as may be recognised by the BBC as pensionable before Smart Pensions where applicable. From 1 April 2011 the BBC has limited increases in pensionable salary subject to the Scheme earnings cap where applicable, to a maximum of 1% each year. Pensionable service The number of years and days of active membership. 17

20 Qualifying earnings The earnings that currently attract BBC matching contributions. Scale pension 1/60th of final pensionable salary for each year of pensionable service. Scheme earnings cap The pensionable salary limit on which contributions and pension benefits are based. For the 2018/19 tax year it is 160,800. The Scheme earnings cap does not apply to members who joined the Scheme before 1 June Smart pensions Smart pensions is an easy way to make contributions to the Scheme which allows you to save some money through reduced National Insurance contributions. Participating in Smart pensions does not affect the number of Added Years you can buy or the amount of AVCs you can pay. Subject to notice and the normal restrictions, you can increase, decrease or stop your purchase of Added Years or AVCs at anytime. 18

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22 Produced by: Pension and Benefits Centre Tel: Web: bbc.co.uk/mypension August 2018