Combined Nuclear Pension Plan (CNPP) Frequently Asked Questions (FAQs) for all members of the New Joiners Benefit Structure; and For any members with defined contribution Additional Voluntary Contributions and Shift Pay Pension Plan contributions The CNPP Trustee has prepared this note for all members of the defined contribution (DC) New Joiners Benefit Structure or any members who have investment accounts from Additional Voluntary Contributions (AVCs) and/or Shift Pay Pension Plan (SPPP) contributions. This list of FAQs is intended to help answer questions you may have about your options as you plan for and approach retirement. They include details of proposed CNPP Rule changes, offering more retirement flexibilities from 1 October 2015. If you have specific queries, please contact your employer representative or the Plan Administrator. These FAQs do not apply to members of the Nirex Benefit Structure who should contact the Plan Administrator with any questions about their retirement. Question Answer 1. When can I retire? Retirement need not be at a fixed time in your life and you can take early retirement from age 55 or carry on working beyond State Pension Age (SPA). Please note: the Government proposes to increase the minimum early retirement age to 57 in 2028 so that it is then consistent with the rise in SPA. Your State pension won t be available until you reach SPA. Retiring early will depend upon your own personal circumstances and if you are a current active member and decide you want to retire early, you should start by speaking to your Employer Representative. If you are thinking about retiring early from the CNPP whilst continuing in employment, please check with the Plan Administrator to see if this is allowed within the Rules of the CNPP (as it is only allowed in a small number of situations). If you have left your employer and have a deferred pension, you should contact the Plan Administrator for information: cnpp.mailbox@aonhewitt.com 2. What happens when I approach retirement? Between 6 April and 30 September 2015: There are no changes to current retirement options or processes (see paragraphs A, B and C below). However, if you wish to take advantage of the proposed flexibilities within the CNPP available from 1 October 2015, you are able to delay your decision regarding what you wish to do with your DC investment account. You will have up to 31 December 2015, or four months from your date of retirement, whichever is the later date, to put your chosen option into place. The choice to delay taking your benefits is entirely yours. Please do remember, that by choosing to delay your decision, the value of your investment account could go up or down and both the cost of purchasing a pension on the open market and legislation may change.
3. What happens when I approach retirement? Please see paragraphs A, B and C below. A. If you are a member of the New Joiners Benefit Structure and: (i) you are retiring at your normal pension age (or your selected pension which you notified to the Plan Administrator), the Plan Administrator will write to you at least four months before you are due to retire to explain the options available (see note 1 below); or (ii) you decide to retire earlier than your normal pension age or "selected pension age", your Employer Representative will contact the Plan Administrator to arrange for your retirement options to be issued to you (see note 1 below). B. If you are not a member of the New Joiners Benefit Structure but are an active member of the CNPP and have made, or are making, DC Additional Voluntary Contributions (AVCs) or Shift Pay Pension Plan (SPPP) contributions, your Employer Representative will ask the Plan Administrator to arrange for retirement options and quotation(s) to be sent to you (see note 2 below). C. If you are no longer working for an employer that provides a CNPP pension, the Plan Administrator will write to you at least four months before you are due to retire to explain the options available. Note 1 - Retirement Options: The Plan Administrator will inform you of the current value of your DC investment account(s), provide details of the retirement options available to you and how you can estimate your future retirement income when you retire. From 6 April until 30 September 2015, you can either ask the Plan Administrator to provide an annuity quotation to you (see note 2 below), or you can select an annuity from an external provider (this is known as the "open market option"). If you select the "open market option" you don't have to use Hargreaves Lansdown s annuity finder link but it does enable you to shop around using the value of your investment account to compare available options (please see How can I obtain quotations from other insurance companies? and Who pays for Hargreaves Lansdown s annuity finder service? below). From 1 October 2015, in addition to the options above, you will have additional flexibilities (please see What can I do with my investment account when I retire below). Note 2 - Retirement Quotations: DC contributions are received monthly from your employer. So if the Plan Administrator is asked (by you or your Employer Representative) to arrange for an annuity quotation to be sent to you, the Plan Administrator must make sure that all contributions have been added to your investment account. This means that if you have been making any DC contributions (regardless of whether they are normal employee/employer contributions, AVCs
or SPPP contributions) shortly before you retire, the quotation can only be sent to you after you have left employment. The quotation will provide a range of options for you, but other options are available and you may ask for further quotations that suit your requirements. Please note: quotations are only guaranteed for a short time and an insurance company will usually reserve the right to amend the quotation if you accept after the guaranteed period has expired. 4. What can I do with my DC investment account when I retire? Between 6 April and 30 September 2015: You can currently take some of your DC investment account as tax-free cash (please see How much tax-free cash can I take at retirement? ) but the remainder must be used to buy an annuity. This may be a temporary annuity (please see What is the State Scheme Spreading Option? ) and/or an annuity for the rest of your life. Alternatively, you can transfer your DC investment account to another provider to access specialist alternatives such as flexiaccess drawdown (please see What is flexi-access drawdown? below). However, if you want to take advantage of the proposed flexibilities within the CNPP which will be available from 1 October 2015, you will be able to delay your decision regarding what you will do with your DC investment account. You will have up to 31 December 2015 or four months from your retirement date, whichever is the later date, to have put your chosen option into place. The choice to delay taking your benefits is yours. Please do remember, that by choosing to delay your decision regarding your DC investment account, the value of your investment account could fluctuate and both the cost of purchasing a pension on the open market and legislation may change. 5. What can I do with my DC investment account when I retire? From 1 October 2015: You will be able to do a combination of the following at retirement: A. Take some of your DC investment account as cash (please see How much tax-free cash can I take at retirement? ) and use the remainder to buy an annuity. This may be a temporary annuity (please see What is the State Scheme Spreading Option? ) and/or an annuity for the rest of your life. If your total benefits in the CNPP do not exceed 10,000 you may be able to take all of your benefits as a cash lump sum (please see What is small pot commutation? below) B. Use some or all of your DC investment account to buy an annuity on the open market from an external pension provider (see What is an annuity below). C. Transfer your DC investment account to an external pension provider and continue to invest it or use it to fund
a flexi-access drawdown arrangement (please see What is flexi-access drawdown? below) or an uncrystallised funds pension lump sum (please see What is an uncrystallised funds pension lump sum? below) D. If you have a DC investment account made up from AVC contributions you may be able to transfer away your DC investment account independent of your main final salary CNPP benefits (please see what are my options for accessing my AVCs or SPPP investment accounts? below for further information). These are new flexibilities and it is therefore important you consider your options and choices carefully and consider seeking professional advice to help you decide which options are most suitable for you. To help people understand their retirement choices, the government has introduced a free and impartial service called Pension Wise. Free guidance appointments will be available to members online, over the phone (tel: 0300 330 1001) or arrange a face to face meeting (https://www.pensionwise.gov.uk/book). Find out more about Pension Wise and the choices that members have at pensionwise.gov.uk. 6. How much tax-free cash can I take at retirement? The amount of tax-free cash you can take from your investment account at retirement will depend upon your circumstances and choices, but may be an amount of up to 25% of the total of your investment accounts. Please note: if you were a former member of the GPS Pension Scheme and have made AVCs, you may be able to take more than 25% of your investment account as a taxfree cash lump sum, depending on your circumstances. Please note: You cannot take 25% of your DC investment account as tax free cash and leave the rest of your DC investment account invested in the CNPP. 7. What are my options for accessing my AVCs or SPPP investment accounts? From 6 April 2015: If you have final salary CNPP benefits and are no longer accruing any AVC and SPPP benefits you may be able to transfer your AVC/SPPP investment account(s) to another provider independently of your main final salary CNPP benefits. You should contact the Plan Administrator for further information: cnpp.mailbox@aonhewitt.com Active members: At retirement you must take your AVC/SPPP benefits when your main final salary CNPP benefits come into payment. If you want to transfer your AVC/SPPP investment account(s) to another provider independently of your main final salary CNPP benefits, you should contact the Plan Administrator for further information: cnpp.mailbox@aonhewitt.com. If you want to take advantage of the proposed flexibilities within the CNPP which will be available from 1 October 2015, you will
be able to delay your decision regarding what you will do with your DC investment account. You will have up to 31 December 2015 or four months from your retirement date, whichever is the later date, to have put your chosen option into place. The choice to delay taking your benefits is yours. Please do remember, that by choosing to delay your decision regarding your DC investment account, the value of your investment account could fluctuate and both the cost of purchasing a pension on the open market and legislation may change. The CNPP Rules do not allow you to defer taking your AVC/SPPPs after you have started to receive your pension from the CNPP. 8. What is an annuity? An annuity is a financial product that provides a regular income stream for a fixed period or for the rest of your life. It is similar to a pension. You buy it from an insurance company with the money you have built up in your DC investment account. With annuities, a pre-existing medical condition may work in your favour, and could boost the amount of income you receive. These types of annuities are called enhanced or impaired life, annuities. 9. What is an enhanced or impaired, life annuity? Enhanced or impaired life annuities work on the basis that, if you have a pre-existing medical condition, you'll likely have a shorter life expectancy than someone in a better state of health. Insurance companies will usually offer you a higher monthly retirement income than someone who is in good health. If this applies to you, you ll need to provide detailed medical information to the insurance company to enable them to assess your health. 10. Can I shop around for quotations? Yes, you can shop around and compare rates. This is known as the "open market option". Choosing your retirement options is an important decision as you will be buying your retirement income for life. You don't have to accept the retirement income offered by the Plan Administrator. You can take your investment account to another insurance company and possibly get a better quotation as you would do with house or car insurance. Shopping around can increase your retirement income and market research suggests that each year people throw away 1bn in pension income through not shopping around, so it s important to read the information about shopping around included with the illustration sent to you by the Plan Administrator. If you believe that you may qualify for an enhanced or impaired life annuity, you should make the insurance company aware of this before you buy your retirement income.
11. How can I obtain quotations from other insurance companies? You can obtain annuity quotations directly from some insurance companies. Alternatively, you can use Hargreaves Lansdown s annuity finder service or another broker. Hargreaves Lansdown can determine whether you qualify for an enhanced or impaired life annuity and will search the market to find the most competitive and appropriate retirement income for you. You should always consider taking professional advice as to which annuity is most suitable for you. You should seek advice from a suitably qualified independent financial adviser and you can find an independent financial adviser by visiting the website https://directory.moneyadviceservice.org.uk. 12. Who pays for Hargreaves Lansdown s annuity finder service? 13. How long does it take to set up my annuity? 14. Can I change my mind once I've bought my retirement income? 15. What is the State Scheme Spreading Option (SSSO)? Hargreaves Lansdown will charge you for this service (currently in the region of 350 to 450). At retirement, the Plan Administrator will ask you whether you wish to use Hargreaves Lansdown s annuity finder service and, if you decide to do so, it will deduct the fee from your investment account. There are other providers of annuity finder services and their fees may be taken in the form of a commission payment from the insurance company. You should be clear about how much you are paying for advice before you engage an annuity finder service. Once you have decided upon the insurance company you wish to use to buy your retirement income and the paperwork has been completed, the Plan Administrator will transfer the value of your investment account to that insurance company within 10 working days. No, under current legislation once you have purchased your retirement income you cannot change to a different insurance company or get your money back. It is therefore important you consider your options and choices carefully and seek professional advice (for example, by referring to an independent financial adviser) if you are uncertain. Insurance companies do offer a short cooling-off period during which you may be able to cancel. However, you should carefully consider your annuity options before you select an annuity. This option is not provided by the CNPP but is offered at the discretion of the Prudential. The SSSO allows you to use your investment account at retirement to buy temporary retirement income until you reach State Pension Age (SPA). Once you reach SPA the Department for Work and Pensions will commence payment of a Basic State Pension and any SSSO will stop. You may use all or part of your investment account to purchase a temporary SSSO pension equal to either: 125% of the value of the current single person s Basic State Pension; or
such lesser amount as the funds can secure. You may exercise the option on retirement providing that it is at least one year prior to reaching the SPA. Any excess funds remaining in your retirement account must be used to buy additional retirement income which will be payable for the rest of your life. Please note: the SSSO is not available to all CNPP members (please see Will the State Scheme Spreading Option (SSSO) be available at retirement? below). 16. Will the State Scheme Spreading Option (SSSO) be available at retirement? The choice of annuities available is dependent on what is available in the market place, and may change over time. The Trustee cannot guarantee that any particular option that is currently available, including the SSSO, will continue to be available in the future. The Plan Administrator will advise you on what is available at the time you come to use your investment account to buy your retirement income. The following paragraph applies only to members of the Springfields Fuels 2, Magnox, LLWR, Sellafield, RSRL and DSRL Sections: The Prudential, the Trustee s current annuity provider, have withdrawn their preferential annuity quotation service (and this includes the SSSO) for members who joined the CNPP after 14 May 2010. If you joined before 14 May 2010 you are unaffected by this change and will automatically receive a quotation from the Prudential on preferential terms at your retirement date. For those who commenced contributions after 14 May 2010 and do not have investments in the Prudential With-Profits Fund (only available to AVCs), the Prudential will still be able to provide a quotation, on request, but it will not be on preferential terms. (For the avoidance of doubt, members of the GPS DRS, GPS WEC/UAM, GPS SLC, GPS Nexia and GPS EnergySolutions Sections should disregard this paragraph). 17. What happens if I die after buying an annuity? If you die after your retirement income begins then, usually, there may be no further payments or lump sum paid to a beneficiary. However, when buying your retirement income you can select certain guarantees to ensure certain money is paid out upon your death, such as: Guarantee period - You can select a guarantee period of up to 10 years. This will mean that, should you die within the selected period, retirement income will continue to be paid until that period expires. Joint-life option - You can select a certain proportion of your annuity to continue to be paid to your spouse or another dependent upon your death. Value protection - If you die before a pre-set age and the total gross income paid out is less than the amount of the fund used to
purchase the annuity, the balance will be paid out as a lump sum, less a 55% tax charge. Selecting any of the above options will affect the retirement income you will receive. The degree to which it is affected will depend upon your circumstances and the options chosen. 18. What is small pot commutation? 19. What is flexi-access drawdown? If all your benefits from the CNPP do not exceed 10,000 and you ve reach minimum pension age, or you are retiring at an earlier age because of ill-health you may be able to take your benefits as a single lump sum. This is known as small pot commutation. If benefits are not in payment, you may have the option to take 25% of your investment account as a tax-free cash sum. The remainder will be taxed at your highest tax rate by adding it to the rest of your income (your marginal tax rate). You should contact the Plan Administrator for further information: cnpp.mailbox@aonhewitt.com Flexi-access drawdown is a way of taking an income from the money you've built up in your investment account. You can choose to take up to 25% of your investment account as a tax-free lump sum. You then move the rest of your account into one or more funds that allow you to take a taxable income at times to suit you. Typically, people use it to take a regular income. The income you receive may be adjusted periodically depending on the performance of your investments and your personal circumstances. More information on flexi-access drawdown can be obtained from the Money Advice Service website: moneyadviceservice.org.uk. Please note: the value of the fund can go down as well as up and is not guaranteed, you may not get back what you have invested. You should obtain professional independent financial advice before considering this option. Flexi-access drawdown is not available in the CNPP (please see Will I be able to access flexi-access drawdown or UFPLS from the CNPP? below). 20. What is an uncrystallised funds pension lump sum (UFPLS)? An uncrystallised funds pension lump sum (UFPLS) product is a way of taking cash lump sums from the money you've built up in your investment account. You can use the money you take from this product to retire fully or semi-retire and supplement your earned income. You would transfer your DC investment account to an individual policy with an external provider designed for UFPLS from which it will be possible to make one-off or regular cash withdrawals. The withdrawals can generally only be made from investment account(s) which have not been used to buy an annuity or enter into a drawdown scheme. You decide how much to take and when to take it (until all the money has been taken). Each withdrawal results in a tax-free cash payment of 25% with the remainder being taxable at your marginal rate. While you re making withdrawals
from your investment account, the remainder of your fund continues to be invested, giving it the potential for growth. This will continue until no monies are left, you die or you choose another method of receiving retirement income. Please note: the value of the fund can go down as well as up and is not guaranteed, you may not get back what you have invested. You should consider obtaining professional independent financial advice before consider this option. UFPLS is not available in the CNPP (please see Will I be able to access flexi-access drawdown or UFPLS from the CNPP? below). 21. Will I be able to access flexi-access drawdown or UFPLS from the CNPP? 22. What is the new Money Purchase Annual Allowance? No, the CNPP does not provide this option. However, other providers do and you will be able to transfer into one of those products offered by insurance companies. Flexi-access drawdown and UFPLS s are complicated arrangements with tax implications and you should always consider seeking professional independent financial advice. You should seek advice from a suitably qualified independent financial adviser and you can find an independent financial adviser by visiting the website https://directory.moneyadviceservice.org.uk/en. As soon as any income is taken from a flexi-access drawdown product or any payment is made as an UFPLS in respect of any of your pension arrangements the Money Purchase Annual Allowance is triggered. You will have to pay a tax charge on any contributions to a DC arrangement over the new Money Purchase Annual Allowance which is currently 10,000. The operation of the Money Purchase Annual Allowance and the way it interacts with the Annual Allowance for accruals under defined benefit schemes is complex and there are transitional arrangements for the tax year 2015/16. If you are still accruing benefits under the CNPP then you will need to speak with the Plan Administrator about your benefits and the Annual Allowance before making any decisions. 23. Where can I get more information and help about my post 6 April 2015 retirement options? To help people understand their retirement choices, the government has introduced a free and impartial service called Pension Wise. Free guidance appointments will be available to members online, over the phone (tel: 0300 330 1001) or arrange a face to face meeting (https://www.pensionwise.gov.uk/book). Find out more about Pension Wise and the choices that members have at pensionwise.gov.uk.
24. What should I do about my pension savings even though I m still some way off my pension age? The level of your pension contributions can be a key factor in determining the overall size of your investment account at retirement. You should regularly review your investments and the amount you contribute and consider whether you need to make higher contributions to meet your retirement income needs. There are many on-line pension calculators which can help you to assess whether your estimated pension at retirement will meet your income needs. Hargreaves Lansdown s pension calculator is at https://hl.co.uk/pensions/interactive-calculators/pensioncalculator It is important for the Plan Administrator to correctly record any preferred pension age you have selected and notified to the pension provider. Please check your annual benefit statement each year to ensure that it matches your planned pension age. You should consider taking professional independent financial advice about your long term retirement savings. You can find an independent financial adviser by visiting the website https://directory.moneyadviceservice.org.uk/en. CNPP Trustee August 2015