Purchase of Additional Benefits

Transcription

1 Purchase of Additional Benefits Please note that the provisions within the regulations governing the police pension schemes dealing with the ability of members to purchase additional benefits are complicated. However, in order to provide some assistance to members, the following FAQs set out PFEW s interpretation of those regulations and represent our best understanding of the current situation. These FAQs are not intended to amount to legal advice or financial advice on any individual case and should not be relied upon as such. As a consequence of the work carried out to put together these FAQs, PFEW has written to the Home Office to seek clarification on a number of points of detail, some of which are specifically mentioned in these FAQs. Once we have obtained clarification, if anything in these FAQs needs to be updated, we will do so as soon as possible. In the meantime, it is for your force to set out exactly what the position is and therefore it is vitally important that before making any decisions you seek a clear statement of the implications from your force. If that statement from your force disagrees with the interpretation of PFEW as reflected in these FAQs, please report that discrepancy to your local Joint Branch Board Secretary who can then inform the Research and Policy Support Department at HQ in Leatherhead. The position before the introduction of the CARE 2015 scheme Officers whilst members of either the Police Pension Scheme (PPS) 1987 or the New Police Pension Scheme (NPPS) 2006 potentially had the option to pay extra contributions in order to gain extra pension benefits. PPS 1987 Members For members of the PPS 1987 there were two options. In circumstances where it was not possible for an officer to complete 30 years of Pensionable Service before reaching age 55 or 60 (dependent on rank and force) it was possible, subject to certain limits and conditions, for that officer to elect to purchase added 60ths of pension. This could be done by the payment of a lump sum or making of extra periodic payments thus potentially enabling the officer to achieve or get closer to a full pension at retirement. Once an officer had entered into an arrangement to purchase added 60ths by making extra periodic payments, it was only possible to cease making such extra periodic payments as a result of financial hardship. In addition, prior to 1 October 2010, it was possible for a member of the PPS 1987 to also become a member of the Police Additional Voluntary Contribution Scheme (Police AVC Scheme) which is a separate arrangement to the main PPS The Police AVC Scheme enables officers to make additional voluntary contributions on 1

2 which tax relief was obtained but these contributions did not purchase specific added benefits under the PPS When it becomes payable the sum of money invested and accumulated by the member in the Police AVC Scheme is used to provide additional retirement benefits chosen by the member. This has historically been achieved by means of the purchase of a policy with an insurance company. However, changes to be introduced shortly (see HOC 007/2016) will give members more choices as to how they can utilise the money they have accumulated in the Police AVC Scheme. For further details about the options available, you should contact your force s pensions administrator. NPPS 2006 Members For members of the NPPS 2006 there was no equivalent option to pay additional voluntary contributions. However, in circumstances where it was not possible for an officer to complete the 35 years of service necessary for a full pension, it was possible, subject to certain limits and conditions, for that officer to elect to pay extra periodic contributions or a lump sum in order to purchase added years of service under the NPPS 2006 up to a maximum of 5 years. Once an officer had entered into an arrangement to purchase added years of service by making extra periodic payments, it was only possible to cease making such extra periodic payments as a result of financial hardship. NB If you are currently paying extra contributions to purchase additional benefits but are unsure of which arrangement you are paying under or what you will secure with your extra contributions, you should contact your force s pensions administrator to check. The position following the introduction of the CARE 2015 scheme This is dealt with in the FAQs set out in the rest of this document. Who does this FAQ document apply to? This FAQ document is relevant to: those members of the CARE 2015 Scheme who prior to transitioning to membership of that scheme had agreed to purchase added 60ths under the PPS 1987 or added years under the NPPS 2006 by making extra periodic payments and are continuing to make those extra periodic payments; those officers who currently remain members of the PPS 1987 or the NPPS 2006 as a result of Tapered Protection, have agreed to purchase added 60ths or added years (as appropriate) under those schemes by making extra periodic payments, continue to make those extra periodic payments; and who are due to transition across to membership of the CARE 2015 Scheme at some point in the future; and those officers who are members of the CARE 2015 Scheme and who wish to consider purchasing added pension under that scheme. 2

3 Who does this FAQ document not apply to? This FAQ document is not relevant to: a member of the PPS 1987 or NPPS 2006 to whom Full Transitional Protection applies and who will remain a member of that scheme. Our understanding (which we are checking with the Home Office) is that such members will continue to have the facility to enter into an arrangement to purchase extra 60ths in the PPS 1987 or added years in the NPPS If they already have such an arrangement in place then the terms and conditions of that arrangement will continue to apply unaltered. officers who are only paying AVCs into the Police AVC Scheme and who are not also paying extra periodic contributions to purchase added 60ths under PPS 1987 or added years under NPPS The terms of any arrangement to pay AVCs into the Police AVC Scheme remain valid and unchanged by membership of the CARE 2015 Scheme. NB To assist your understanding of this FAQ document a Glossary of Terms is included at the back of the document. 3

4 SECTION A Members of the PPS 1987 or NPPS 2006 (collectively PPS 1987/NPPS 2006) who will join or have joined the CARE 2015 Scheme (with no break in membership) who started making extra periodic payments for additional benefits whilst a member of the PPS 1987/NPPS 2006 Q1 Will the added 60ths/years purchased under the PPS 1987/NPPS 2006 count towards whether I qualify for Full Transitional Protection or Tapered Protection or the length of any Tapered Protection? No, if you paid extra contributions to purchase added 60ths under the PPS 1987 these do not count towards your Pensionable Service for the purposes of establishing your entitlement or otherwise to Transitional Protections under the PPS The Transitional Protections under the NPPS 2006 are determined solely on the basis of age and therefore the purchase of added years is not relevant to the determination. Q2 I am a PPS 1987/NPPS 2006 member who has Tapered Protection. Can I enter into a new arrangement to pay extra contributions to purchase added 60ths/years before moving to the CARE 2015 Scheme? The position here is unclear and we have written to the Home Office asking for clarification on this matter. We will update these FAQs as soon as we obtain that clarification. In the meantime, if you wish to explore this possibility, you should approach your force s pensions administrator for more information. Q3 I was paying extra periodic contributions to purchase added 60ths/years in the PPS 1987/NPPS 2006 but have now become a member of the CARE 2015 Scheme. What has happened to the extra periodic contributions which I have continued to pay since joining the CARE 2015 Scheme? The arrangement which you entered into for the purchase of added 60ths/years whilst a member of the PPS 1987/NPPS 2006 has remained valid and the extra periodic contributions which you have continued to pay since becoming a member of the CARE 2015 Scheme have continued to purchase added 60ths/years for you under the PPS 1987/NPPS 2006 in accordance with the terms of that original arrangement. 4

5 Q4 Am I able to continue to pay extra periodic contributions and accrue further added 60ths/years under PPS 1987/NPPS 2006 on this basis in accordance with the existing arrangement? Yes, provided that you continue to remain an Active Member of the CARE 2015 Scheme, then the terms of the original arrangement will remain valid and you will continue to accrue the added 60ths/years under the PPS1987 /NPPS 2006 as agreed, subject to any applicable limit. Q5 Do I have to continue paying extra periodic contributions for added 60ths/years under the PPS 1987/NPPS 2006 in accordance with the existing arrangement? If you have already transitioned to become a member of the CARE 2015 Scheme, then the answer is no. You may choose to terminate the arrangement and stop making the extra periodic payments at any time after becoming a member of the CARE 2015 Scheme. However, if you are currently still a member of the PPS 1987 or the NPPS 2006 as a result of Tapered Protection and are not due to transition to become a member of the CARE 2015 Scheme until some point in the future, then the terms and conditions of the original arrangement remain in force. This means that you can only cease to make any extra periodic payments as a result of financial hardship. However, once you have transitioned across to membership of the CARE 2015 Scheme, then you will have the option to stop making the extra periodic payments. Q6 If, after transitioning to the CARE 2015 Scheme, I choose to terminate my arrangement to purchase added 60ths/years in the PPS 1987/NPPS 2006 and therefore cease making extra periodic payments earlier than anticipated under that arrangement, what benefit will I receive for the extra periodic payments I have already made? The effect of terminating the arrangement in this way is not spelled out in the relevant regulations and we are taking this up with the Home Office. However, it seems likely that the effect of ceasing to make extra periodic payments would be that you would receive (at the time your pension became payable) whatever you had purchased at the time of ceasing to make extra periodic contributions. However, if you are considering terminating an arrangement which started whilst you were a member of the PPS 1987/NPPS 2006, you should contact your force s pensions administrator before doing so in order to establish exactly what added 60ths/years you will be credited with under the PPS 1987/NPPS 2006 if you terminate the arrangement early. 5

6 Q7 What salary figure will be used in calculating the pension I get from my added 60ths/years under PPS 1987/NPPS 2006? Regardless of whether you choose to continue the original added 60ths/years arrangement or terminate it, as is the case with the rest of your accrued pension under the PPS 1987/NPPS 2006, provided you remain a member of the CARE 2015 Scheme until you retire the added 60ths/years you purchase under the PPS 1987/NPPS 2006 will be calculated using your Final Final Salary at the date of your eventual retirement. However, if you leave the CARE 2015 Scheme either by opting out of membership or by ceasing to be a police officer, then the added 60ths/years you have purchased will be calculated using your salary at the point of leaving the scheme/service. The exception to this is that if you re-join the CARE 2015 Scheme within five years of opting out or leaving service, then although you will not be able to make any more extra periodic payments under the original arrangement to secure any further added 60ths/years under the PPS 1987/NPPS 2006, the added 60ths/years you accrued before you left or opted out of the CARE 2015 Scheme will once again be linked to your Final Final Salary. Q8 Can a PPS 1987/NPPS 2006 member enter into a new arrangement to pay extra contributions to purchase added 60ths/years under the PPS 1987/NPPS 2006 after they have become a member of the CARE 2015 Scheme? Although we are awaiting confirmation from the Home Office on this matter our understanding is that once you have become a member of the CARE 2015 Scheme you will not be able to enter into a new arrangement to purchase added 60ths/years under the PPS 1987/NPPS 2006, However, it is possible to enter an arrangement to pay extra contributions to purchase added pension under the CARE 2015 Scheme as described in Section B, below. Q9 Is it possible for me to enter into an arrangement to pay extra contributions to purchase added pension under the CARE 2015 Scheme whilst also continuing to pay extra periodic contributions to purchase added 60ths/years under the PPS 1987/NPPS 2006? This is possible and there is a description of the facility which enables members to purchase added pension under the CARE 2015 Scheme and the details of how this works in Section B, below. However, there are a number of factors that might potentially either prevent or limit your ability to purchase added pension. For example, the Scheme Manager can set a minimum payment threshold for allowing the purchase of added pension in the CARE 2015 Scheme. There is also an overall limit on the amount of added pension that you may purchase under the CARE 2015 Scheme. Please also remember that there are HMRC limits on the total value of 6

7 pension benefits that you may accrue on a tax free basis, in any year and throughout your working life. Your force s pensions administrator should be able to advise you whether or not these limits do or are likely to affect you. You should contact your force s pensions administrator if you wish to explore this option. Q10 Is it possible for me to cancel my existing arrangement to purchase added 60ths/years under the PPS 1987/NPPS 2006 and then enter into a new arrangement to purchase added pension under the CARE 2015 Scheme? Yes, as explained above, you may cancel an arrangement to purchase added 60ths/years under the PPS 1987/NPPS 2006 at any time after becoming a member of the CARE 2015 Scheme. There is a facility which enables members to purchase added pension under the CARE 2015 Scheme and the details of how this works appear in Section B, below. 7

8 SECTION B Members of the CARE 2015 Scheme who wish to pay extra contributions to purchase added pension under that Scheme Q11 Is it possible to pay extra contributions to purchase additional benefits under the CARE 2015 Scheme? Yes, subject to various limits and conditions (see Q15 below), it is possible for someone who is an Active Member of the CARE 2015 Scheme to either pay a lump sum or make extra periodical payments in addition to their ordinary member contributions in order to secure added pension either solely for themselves ( self only ) or for themselves and their survivors should they die ( all beneficiaries ). Q12 If I wanted to exercise the option to purchase added pension under the CARE 2015 Scheme, how would I go about it? The first step would be to speak to your force s pensions administrator to discuss the options and processes that apply. Having done that if you wish to pursue this option then to formally trigger the process you need to provide a written notice to the Scheme Manager stating whether you are purchasing self only or all beneficiaries benefits and whether you will be paying for them by means of a lump sum or making extra periodical payments. If you are paying a lump sum you must state the amount of that lump sum. If you are making extra periodical payments you must state the period over which you will be making those payments and how much each payment will be (either a percentage or a fixed sum). Q13 If I am able to (see Q15 below) and choose to pay a lump sum to purchase added pension under the CARE 2015 Scheme when will the payment be made? If you choose this option you will be expected to make the payment immediately either by deduction from your pay or direct to the Scheme Manager. Your force s pensions administrator should be able to give you details as to when exactly the payment will be collected. Q14 If I enter into an arrangement to make extra periodic payments for the purchase of added pension under the CARE 2015 Scheme, when will the payments begin and when will they end? If you exercise the option to make extra periodic payments to purchase added pension within three months of becoming an Active Member of the CARE 2015 Scheme, then the force will start to deduct the extra periodic payments from your 8

9 earnings with effect from the pay period following the one in which the Scheme Manager receives your written notice to exercise this option. If you exercise the option at any other time, then the force is likely to start to deduct the extra periodic payments from your earnings with effect from the first pay period in the Scheme Year (1 April to 31 March) following the one in which the Scheme Manager received your written notice exercising this option. Subject to what the following FAQs say about cancelling your payments, the extra periodic payments will cease on the earlier of: i) the date specified in your written notice exercising the option; or ii) the date on which you cease to be an Active Member of the CARE 2015 Scheme either by opting out or leaving the force. Q15 Are there any limits and/or restrictions that apply to the purchase of added pension under the CARE 2015 Scheme? Yes, there are a number of limits and restrictions that may apply. The Scheme Manager may set a minimum payment threshold for both lump sums and extra periodic payments payable under the CARE 2015 Scheme. In order to make a lump sum payment to purchase added pension you need to have been an Active Member of the CARE 2015 Scheme for at least 12 months and in some cases you will also need to have been provided with a statement of the amount of added pension from the Scheme Manager (your force s pensions administrator will be able to confirm whether or not this applies to you). You can exercise the option to make extra periodic payments to purchase added pension under the CARE 2015 Scheme at any time and as many times as you like although you may only exercise the option to make a lump sum payment once every Scheme Year. There is an overall limit, set by Her Majesty s Treasury, on the amount of added pension which you can purchase under the CARE 2015 Scheme. For the Scheme Year 1 April 2016 to 31 March 2017 that amount is 6,500. For subsequent Scheme Years this figure may be adjusted and the new figure will be published by HM Treasury. Q16 Can the Scheme Manager cancel an arrangement to purchase added pension under the CARE 2015 Scheme? Yes, if it appears to the Scheme Manager that if you continue to make extra periodic payments the overall HM Treasury limit applicable to the CARE 2015 Scheme mentioned above will be exceeded then the Scheme Manager can give you written 9

10 notice of cancellation and the extra periodical payments under the CARE 2015 Scheme will cease with effect from the beginning of the pay period after the date specified in the notice of cancellation. Q17 If the overall limit is exceeded, what happens to any excess payment I have made to the CARE 2015 Scheme? In these circumstances the Scheme Manager is obliged to refund to you any amount that you have paid under the CARE 2015 Scheme (periodic payment or lump sum) which has led to the overall limit being exceeded. Q18 Am I able to cancel an arrangement to make extra periodic payments to purchase added pension under the CARE 2015 Scheme? Yes. A member may cancel an option to make extra periodic payments under the CARE 2015 Scheme at any time by notice in writing to the Scheme Manager. The extra periodic payments will then cease to be deducted from the start of the Scheme Year after the one in which the Scheme Manager receives that written notice of cancellation. Q19 What happens if I have an arrangement to make extra periodic payments to purchase added pension under the CARE 2015 Scheme and I then enter a period of assumed pay? NB - A period of assumed pay can arise in a number of instances where an officer is absent from work and either receiving no pay or reduced pay as a result of circumstances such as sickness, maternity leave, parental leave, adoption leave, or recall to duty in the armed forces. For more details of when this applies, please contact your force s pensions administrator. If you enter a period of assumed pay you have a choice. You may choose to continue to pay the extra periodic payments under the CARE 2015 Scheme at the rate and frequency agreed as if you were receiving pay at the normal rate. Alternatively, you may choose to stop making any extra periodic payments at all during the period of assumed pay. If you choose to stop making the extra periodic payments during the period of assumed pay, you may, by written notice to the Scheme Manager, opt to resume the extra periodic payments at the next pay period following the end of the period of assumed pay. Note to Q19: The answer given to Q19 represents PFEW s best interpretation of the provisions in the regulations. However, the situation is not entirely clear in the regulations. We have written to the Home Office seeking clarification and we will update these FAQs as soon as we receive that clarification. 10

11 Q20 What happens if I have an arrangement to make extra periodic payments to purchase added pension under the CARE 2015 Scheme and I then enter a period during which I receive statutory maternity pay or am on paid maternity, adoption, maternity support or adoption support leave? If you enter a period during which you receive statutory maternity pay or are on paid maternity, adoption, maternity support or adoption support leave you have a choice. You may choose to continue to make the extra periodic payments under the CARE 2015 Scheme but these will be based on the actual pay you receive during the period during which you receive statutory maternity leave or are on paid maternity, adoption, maternity support or adoption support leave. We are querying with the Home Office the precise amount of added pension which will be credited when extra periodic contributions continue to be made in these circumstances and we will update these FAQs once we receive clarification. Alternatively you may choose to stop making the extra periodic payments. Note to Q20: The answer given to Q20 represents PFEW s best interpretation of the provisions in the regulations. However, the situation is not entirely clear in the regulations. We have written to the Home Office seeking clarification and we will update these FAQs as soon as we receive that clarification. Q21 If I choose to pay a lump sum to purchase self only added pension under the CARE 2015 Scheme, how is my added pension calculated? Following receipt of the lump sum paid to purchase added pension under the CARE 2015 Scheme an amount of added self only pension will be credited to your account for the Scheme Year in which the lump sum is paid. The amount credited to your account will be either: where the Scheme Manager has provided a statement of the added pension to be granted for the lump sum before the payment of the lump sum and payment is made within one month of the provision of that statement; the amount specified in the statement; or in all other circumstances, the amount determined by the scheme Manager in accordance with actuarial tables provided by the scheme actuary taking into account factors such as the amount of the lump sum, your age and gender and the cost of securing the pension. Once your account has been credited the added pension for that Scheme Year will be treated in the same manner as the pension secured by your ordinary contributions paid in that Scheme Year. That means that whilst you remain an Active Member of the CARE 2015 Scheme it will be revalued each Scheme Year by the 11

12 movement in the CPI % and if you leave the CARE 2015 Scheme it will continue to be revalued each year, up until the commencement of payment, by the movement in the CPI (see Sections 4.2 and 4.4 of the main FAQ document, see link below). _27_March_2015_FINAL.pdf Q22 If I choose to pay a lump sum to purchase all beneficiaries added pension under the CARE 2015 Scheme, how is that pension calculated? Basically what happens is the same as described above in Q21 for self only added pension, except that in allocating the relevant added pension to your account the actuarial tables used by the Scheme Manager also take account of the need to provide the added pension for your beneficiaries. Q23 If I choose to make extra periodic payments in order to purchase self only benefits under the CARE 2015 Scheme, how is my added pension calculated? For each Scheme Year in which you make extra periodic payments under the CARE 2015 Scheme an amount of self only added pension will be credited to your account for that Scheme Year. The amount to be added is determined by the Scheme Manager in accordance with actuarial tables provided by the scheme actuary which have regard to the cost in that Scheme Year of purchasing the added pension for a person of your age and gender. If you make extra periodic payments during more than one Scheme Year, then for each Scheme Year in which you make extra periodic payments your account will be credited accordingly. Once your account has been credited with added pension for a Scheme Year the added pension for that Scheme Year will be treated in the same manner as the pension secured by your ordinary member contributions paid in that Scheme Year. That means that whilst you remain an Active Member of the CARE 2015 Scheme it will be revalued each Scheme Year by the movement in the CPI % and if you leave the CARE 2015 Scheme it will continue to be revalued each year up until the commencement of payment by the movement in the CPI (see Sections 4.2 and 4.4 of the main FAQ document, see link below). This applies in the same manner for each Scheme Year for which your account receives a credit as a result of you paying extra periodic payments to purchase added pension. _27_March_2015_FINAL.pdf 12

13 Q24 If I choose to make extra periodic payments to purchase all beneficiaries added pension under the CARE 2015 Scheme, how is that pension calculated? Basically what happens is the same as described above in Q23 for a self only pension under the CARE 2015 Scheme purchased with extra periodic payments except that in allocating the relevant added pension to your account for each Scheme Year in which you make periodic payments the actuarial tables used by the Scheme Manager also take account of the need to provide the added pension for your beneficiaries. 13

14 GLOSSARY OF TERMS Active Member A serving officer who is contributing to one of the police pension schemes and accruing benefits under that scheme in respect of current service. It may also include a member of a police pension scheme on unpaid leave (including a career break), depending on the individual circumstances and pension scheme. CARE 2015 Scheme The Police Pension Scheme 2015 CPI Final Final Salary Full Transitional Protection HMRC The Consumer Prices Index; a measure of inflation Police Pension Scheme (PPS) 1987 and New Police Pension Scheme (NPPS) 2006 members who join the CARE 2015 Scheme will have their PPS 1987 and NPPS 2006 benefits calculated by reference to their final salary at the point of retirement and not by reference to their final salary when they move into the CARE 2015 Scheme A protection which enables Police Pension Scheme 1987 and New Police Pension Scheme 2006 members to remain in those schemes and therefore not become members of the Police Pension Scheme Members with Full Transitional Protection will see no change in when they can retire nor any decrease in the amount of pension they receive Her Majesty s Revenue and Customs New Police Pension Scheme The pension scheme established by the Police (NPPS) 2006 Pensions Regulations 2006 Pensionable Service Police AVC Scheme The service which counts in the calculation of a pension and during which pension contributions are made or are deemed to have been made. Under the CARE 2015 Scheme there is no maximum length of pensionable service The Police Additional Voluntary Contribution Scheme. A scheme available to members of Police Pension Scheme 1987 whereby extra contributions could be paid and additional benefits secured. This scheme was closed to new entrants on 1 October

15 Police Pension Scheme (PPS) The pension scheme established by the Police 1987 Pensions Regulations 1987 Police Pension Scheme 2015 PPS 1987/NPPS 2006 Scheme Manager Scheme Year Tapered Protection Transitional Protection The pension scheme established by the Police Pensions Regulations 2015 A collective term for the Police Pension Scheme (PPS) 1987 and the New Police Pension Scheme (NPPS) 2006 The Chief Officer of the force, except in the City of London where the Scheme Manager is the Common Council of the City of London Applicable to the CARE 2015 Scheme only. A period of one year beginning with 1 April and ending with 31 March The protection which allows a Police Pension Scheme 1987 or New Police Pension Scheme 2006 member to remain in that scheme beyond 1 April When Tapered Protection ceases, the member moves into the CARE 2015 Scheme The protection afforded to members of the Police Pension Scheme 1987 and the New Police Pension Scheme 2006 who were closest to retirement on 1 April 2012, as a consequence of the introduction of the CARE 2015 Scheme. Transitional Protection is provided either as Full Transitional Protection or Tapered Protection 15