Your benefits > An overview of the Scottish Enterprise Pension & Life Assurance Scheme For active members who joined prior to 1 December 2006 > What you get > Membership of the Scheme > Making the most of your savings > Life events > Useful information and contacts
Your benefits As an employee of Scottish Enterprise ( SE ), you are an important investment for the future wellbeing of SE. But we want to help you invest in yourself and enjoy life after work! Information on the treatment of your benefits in respect of your later period of service can be found in the booklet entitled For active members joining on or after 1 December 2006. If you are unsure which booklet you should refer to please contact the SE HR Customer Delivery team. Do you think you are too young to worry? At SE we devote significant time and resources to giving you quality pension and insurance benefits. This is a summary of the benefits provided by the Scheme. Full details of all benefits and the rules governing the Scheme are contained in the Trust Deed and Rules. In the event of any discrepancy between this booklet and the Trust Deed and Rules, the terms of the Trust Deed and Rules shall override. Do you find pensions confusing? This booklet explains how the Scottish Enterprise Pension & Life Assurance Scheme ( the Scheme ) works and the benefits on offer. It will help you build up your knowledge of saving for your retirement. Use it; learn from it! The information set out in this booklet relates to benefits for members who joined the Scheme prior to 1 December 2006. If you were an active member of the Scheme prior to 1 December 2006, left the Scheme, and have since been readmitted after this date, your two periods of service in the Scheme will be treated separately. Please note SE is not responsible for the content of external websites. Your notional pay is equivalent to your pensionable salary and we use these terms interchangeably throughout the document. If you participate in the Scheme via the Pension Salary Exchange ( PSE ) and you decide to make Added Voluntary Contributions then these payments will also be made via PSE (i.e. a reduction to your pensionable salary) in line with rules of PSE participation. Do you think you can t afford a pension? If you don t get what it s all about then Read, ask, listen, understand, take a look > 2
Get Imagine a time when you no longer have to work and a time when you do not have a wage... But you do have a life of leisure savings to give you the lifestyle you want... Look at what you can get Pension based on your pensionable salary and length of service with increases to help keep pace with inflation A tax-free lump sum of 3 x your annual pension at retirement (Based on standard benefits, variations are available on request) Life Assurance of 3 x your pensionable salary (tax-free)* Pension for your Beneficiary/Eligible Children when you die Immediate pension if you become permanently ill or disabled and cannot continue working If you join the scheme If you do not join See page a a x 11, 12 x 11 a a a x x x 22 17, 22, 23 20,21 All the above costs you no more than 6% of your pensionable salary because SE pays for the majority of the benefits. * The pensionable salary used in calculating your death in service lump sum (Life Assurance) is in proportion to your actual earnings at date of death. For example, if your full time pensionable salary is 40,000 and you work 17.5 hours per week, your death in service lump sum would be 60,000 (3 x 20,000). If you continue to work past the age of 65 certain qualifying conditions apply to continued eligibility for Life Assurance. See page 7 to find out the real cost of membership 3
Get You also have the option to... See page Increase your tax free lump sum You can elect to take any level of cash up to the maximum tax free lump sum (generally a quarter of the value of your pension) and receive a reduced pension Make extra contributions (AVCs) to increase your pension Paying AVCs allows you to buy extra service in the Scheme. Alternatively, you could consider personal savings separate from the Scheme. Take all of your benefits as cash If you have only built up a small amount of pension, you may be able to convert this into a single lump sum payment. 11 Transfer your benefits to another arrangement If you leave Pensionable Service, you have the option of transferring your benefits to any new employer, provided it is able and willing to accept it, or to a personal arrangement of your choice. 18 11 14, 15 4
Get Benefits of membership For many people, a pension is not something they wish to think about when they are young. After all, retirement seems too far away to be worth worrying about. But as you get older, you may begin to wonder how you will manage after retirement. By this time, it may be too late to build up enough benefits for your retirement needs. It is never too early to start saving. Your retirement may last for 20 or 30 years or more. As a member of the Scheme you have access to a very competitive pension arrangement. The Scheme is a final salary scheme. You can work out the amount of pension you would normally expect by calculating your years of service in the Scheme (known as Pensionable Service) and Final Pensionable Salary. It differs from a money purchase scheme (also known as a defined contribution scheme), which does not promise to pay out a set amount at retirement. The contributions made are paid into a fund and invested on your behalf by the Trustees. The fund is kept separate from the assets of SE and is used to pay for your benefits. The benefits you receive do not depend on how much money is in the fund at a particular time. The Scheme is registered with Her Majesty s Revenue & Customs ( HMRC ). This means that pension contributions get tax relief and you get tax advantages on some of the benefits. For example, your lump sum on retirement and any lump sum death benefit paid to your Beneficiaries is normally paid free of tax. Membership in the Scheme reduces your taxable income and therefore the amount of tax you pay. This means that if you are paying tax at the basic rate, currently 20% (tax year 2016/17), every 1 you contribute costs you only 80p in actual take home salary. The relief is correspondingly more for a higher rate tax payer. Please refer to the following website for more details www.gov.uk/tax-on-your-privatepension/pensiontax-relief Due to the many tax advantages, the benefits provided by the Scheme are subject to certain limits laid down by HMRC. These limits are periodically reviewed and for many members they will not be an issue. However, when comparing your benefits against the HMRC limits you will need to take account of benefits payable to you from any other pension arrangements you have. The Scheme is run by the Trustees in accordance with its governing documentation, the Trust Deed and Rules, and the law. The Trust Deed and Rules have been drawn up to comply with statutory and regulatory requirements. If you would like to see these documents, please contact the SE Administration Team at Hymans Robertson. If there is any conflict between this booklet and the Trust Deed and Rules, the Trust Deed and Rules will override. Help point Is final salary ( defined benefit ) the same as money purchase ( defined contribution )? No they are different. Final salary schemes have a fixed formula to calculate your pension at retirement in advance so you know what you are getting, and you do not take any investment risk. On the other hand, defined contribution schemes simply fix the amount of contributions paid into your pension fund. The eventual pension depends on what has been paid in, how well your investments perform and the cost of buying an annuity from an insurance company at the time of retirement. An annuity is a regular amount of income, often paid monthly by an insurance company, for a specified period of time in exchange for a one-off payment. Members now have the option to draw freely from their funds rather than purchase an annuity on retirement, subject to additional tax charges. 5
Get Pension Salary Exchange Am I eligible for PSE? The Scheme participates in pension salary exchange (PSE) which is a salary sacrifice arrangement. Participation in PSE is subject to company consent and is at the absolute discretion of Scottish Enterprise. To be eligible to take part in PSE, you must be a member of the Scheme and earn enough to pay NICs. However, you can still become a member of the Scheme by paying contributions directly to the Scheme. What do I pay? If you participate in pension salary exchange (PSE), SE pays a 6% contribution directly to the Scheme on your behalf (along with the employer pension contribution) and your pay is reduced by that same amount. Your notional salary is your annual salary before tax and reductions due to salary sacrifice arrangements. Most members of the Scheme will be eligible for PSE however the SE HR Customer Delivery team will arrange to speak to you if you are not eligible to explain what options are available to you. How does PSE work? PSE is a salary sacrifice arrangement. If you are already exempt from paying NICs for example if you are already receiving a state pension you are not eligible to take part in PSE. Under PSE, your notional salary remains the same and your pay is reduced by an amount of pension contribution (currently 6% of your notional salary). If you earn less than 10,000 you are unlikely to be eligible for PSE. This is because you may fall below the lower earnings limit to pay NICs and it may affect your eligibility for some state benefits. SE increases its contribution to the Scheme by an amount equal to the reduction to your pay mentioned above. If you are already using other salary sacrifice arrangements for example, child care vouchers, cycle to work or additional annual leave you will need to check that your salary after reduction still meets the minimum NICs eligibility. If it is at or close to this level, you may not be eligible for PSE. SE also makes an employer contribution. As PSE reduces your pay, you will pay less NICs than you otherwise would: your NICs are calculated on your pay after PSE is applied. The cost of benefits the Scheme can provide is greater than 6% of your notional salary. Consequently SE also makes an employer contribution to meet the balance of the cost of the Scheme benefits. The rate of contributions made by SE is assessed as part of the Actuarial Valuation every three years on the advice of the Scheme Actuary as legally required. The Scheme Actuary is a professionally qualified financial expert appointed by the Trustees. If you participate in PSE it reduces the amount of National Insurance Contributions (NICs) you pay. What does SE pay? If you are on long term leave which brings your pay close to the lower earnings limit, for example, long term sick leave on nil or half pay, this may affect your eligibility for PSE. If your reduction in salary as a result of PSE would drop your rate of pay below National Living Wage then you will not be eligible for PSE. 6
Get What if I m not eligible for PSE? If you are not eligible for PSE you can still contribute to the Scheme by paying contributions directly to the Scheme. This means your pension contribution is deducted from your notional salary through the payroll system. Your contribution rate to the Scheme is 6% of your notional salary. What is the real cost of membership? Example: A full time member earning 30,000 a year whose pay is reduced by 6% might appear to pay 1,800 a year (0.06 x 30,000), but because of PSE will pay less NICs. PSE From April 2016, you were given the choice to take part in PSE or continue paying contributions directly to the scheme. All eligible members joined PSE unless you told us you wished to opt out. You will generally only be able to change your decision to participate in PSE in exceptional circumstances e.g. if you have a lifestyle change. For further information about PSE you should contact SE HR Customer Delivery team. You can read about PSE and other salary sacrifice arrangements on the HMRC website www.gov.uk/guidance/salary-sacrifice-andthe-effects-on-paye Without PSE With PSE Your salary 30,000 (Gross salary) 30,000 (Notional salary) Salary sacrifice for pension contributions N/A 1,800 NI contributions 2,633 2,417 Pension contributions 1,800 0 ( 1,800 pension contributions are paid by the Company) Take home pay before tax and after NI 25,567 25,783 Example This is an illustration only and correct at the time of writing (2016/17 allowances). Tax relief and NI savings are set by the Government and will change in future. Employer contributions 6,000 Total contributions 7,800 Employer contributions 7,800 Employee contributions 1,800 Notional salary 30,000 Basic Pay 28,200 Basic Pay 30,000 Savings in NICs 216 In addition the member receives tax relief of 20%, which in this example is 360 a year. (This is an illustration only and correct at the time of writing (2016/17 allowances). Tax relief and NI savings are set by the Government and will change in future.) 7
Get HMRC limits Please note all contributions, tax relief and benefits are subject to HMRC limits. HMRC limits are subject to change. Visit https://www.gov.uk/tax-on-yourprivate-pension for current details. For example, the Finance Act 2004 sets an upper limit on the rate at which you can build up retirement benefits each year without incurring a tax charge. This is known as the Annual Allowance. For most members of the Scheme, their Annual Allowance will be 40,000. If you have income of more than 150,000 then your Annual Allowance may lie somewhere between 10,000 and 40,000. Annual Allowance is applicable to all contributions i.e. employer and employee contributions. Please refer to the following website for more details https://www.gov.uk/tax-on-your-private-pension/ annual-allowance. There is also an upper limit on the maximum amount of pension benefits that can be built up over a lifetime without incurring a tax charge. This is known as the Lifetime Allowance. The Lifetime Allowance will be 1 million from 2016/17. This equates to an annual pension from the Scheme of 43,478 (and a corresponding cash lump sum of around 130,435). Therefore, it is unlikely that this will impact many staff. You will be informed if restrictions apply to you and the impact on your benefits. To check members benefits against the Annual Allowance, every pension scheme has to measure the growth in benefits over an annual period this is known as the Pension Input Period and from 2016/17 this is the tax year. Unused Allowance can be carried forward from the previous three years and added to the Annual Allowance for the current Pension Input Period. 8
Membership of the Scheme Transferring into the Scheme An Expression of Wish Form The Trustees do not accept transfers into the Scheme from other pension schemes. This form is an important document. It indicates who you would like death in service benefits to be paid to. This is not binding on the Trustees (for tax purposes), however in most cases the Trustees will follow your wishes. Personal information Any personal information provided by you, SE and others, is held on computer and used by the Trustees and those involved in the running of the Scheme. The Trustees have registered the information and its use with the Information Commissioner under the Data Protection Act 1998. The Act gives you certain rights to ensure the information is accurate and that proper security is maintained. It is important that you keep your Expression of Wish Form up to date. If you wish to register new details please print off a form, fill in your details, sign the Expression of Wish Form and send it to the SE Administration Team at Hymans Robertson. A cohabitee nomination form Society is changing and there is a much higher proportion of cohabiting couples than ever before. SE believes in equality, so the Scheme benefits include a cohabiting partner pension. This means that unmarried partners of members will now be entitled to the same pension benefits as married spouses or civil partners, subject to qualifying criteria. In order to qualify for this benefit, you and your cohabiting partner should sign a declaration stating: you are free to marry or enter into a civil partnership with each other; you are currently living together as if you were a married couple; neither of you is living with someone else as if you were a married couple; and your financial affairs are interdependent (or your nominated cohabiting partner is financially dependent upon you). PLEASE NOTE: You and your cohabiting partner must be free to marry or form a civil partnership. If you have a legal spouse or civil partner, then your new partner will not be eligible for a cohabitee pension. If you wish to nominate a cohabiting partner, or update your nomination details, please print off a form, fill in your details, sign it and send it to the SE Administration Team at Hymans Robertson. Keep in touch You should keep SE HR Customer Delivery team up to date with your personal details, including your marital or civil partnership status and address; otherwise delays may occur in paying benefits. You can email us at hrcustdeltm@scotent.co.uk 9
Save Making the most of your savings What will the world be like when you retire? Your retirement could easily last up to 20 or 30 years or more, so the earlier you prepare for retirement the greater the likelihood that your retirement years will be financially comfortable. Putting off your decision to join a pension arrangement could make a big difference to the income you eventually have to live on. Do you think you can manage on a State Pension? To find out more about financial planning The Money Advice Service is a free, independent service, set up by the Government. They have some useful interactive money planners, including a pension calculator, on their website: www.moneyadviceservice.org.uk State Pension Your State Pension is payable from the State Pension age. To find out when you ll reach State Pension age, you can use the Government s online State Pension calculator found here https://www.gov.uk/ calculate-state-pension. www.moneyadviceservice.org.uk The amount you get may be higher or lower than the full pension depending on your National Insurance record. Please refer to www.gov.uk/new-statepension for more details on current allowances. Of course, Government support is available for people in need (such as Housing Benefit and Pension Credit), but this is aimed at ensuring people do not live below the poverty line. It is unlikely that this assistance will be available to people in receipt of a pension from their employer. www.moneyadviceservice.org.uk/en/tools/ pension-calculator 10
Save Retirement benefits The Trustees recommend that you take independent financial advice before deciding how to proceed. The Scheme is designed to provide you with a pension and tax-free lump sum related to the salary you earn close to retirement. Can I take all of my pension as a lump sum? When you retire On retirement, the standard benefits you will get are: A pension for life (taxable) = 1/80 x Final Pensionable Salary x Pensionable Service Plus cash A lump sum (tax-free!) = 3/80 x Final Pensionable Salary x Pensionable Service Variations on the level of lump sum may be available on request, subject to any legal limits. Remember that, from State Pension Age, your Basic State Pension is paid in addition to your Scheme pension. Getting more For each year you are an active member of the Scheme, you will increase your years of Pensionable Service and in turn, increase your pension and lump sum. If you wish, you may give up part of your pension for an extra lump sum on retirement. You can only do this within the limits set down by the Finance Act 2004. Alternatively, you may give up part of your lump sum to provide extra pension. For more details please contact the SE Administration Team at Hymans Robertson. If you have only built up a small amount of pension, you may be able to convert this into a single lump sum payment. The rules around this have been relaxed and you will qualify for this option if your total pension from all retirement savings is less than 1,500 per annum (p.a.) or your pension from this scheme is less than 500 p.a. The earliest age for this option is normal minimum pension age (currently 55). How does your pension keep pace with inflation? In order to ensure that your pension keeps pace with the cost of living, your pension is reviewed annually and an increase awarded effective from April each year. Increases are also awarded annually on your Beneficiary s and Eligible Children s pensions. Currently, the rate of increase is set by the Government and is based on the rise in the Consumer Prices Index for the year to the previous September. However, the basis for this increase is not guaranteed and is subject to change in the future. When you reach State Pension Age, the responsibility for payment of pension increases is shared between the Scheme and the Government. If you would like to know more details please contact the SE Administration Team at Hymans Robertson. Only 8% of employees in the private sector are in final salary (or defined benefit) schemes*. As a SE employee you have access to the valuable benefits of a final salary pension scheme. For example: A SE member retiring at Normal Retirement Age (NRA) with 20 years Pensionable Service and a Final Pensionable Salary of 26,000 p.a. Pension 1/80 x 26,000 x 20 6,500 each year Plus cash 3/80 x 26,000 x 20 19,500 lump sum * Office for National Statistics, Pension Trends, Ch. 7 Private Pension Scheme Membership, published 12 June 2014. 11
Save Retirement at or after Normal Retirement Age If you retire at or after your Normal Retirement Age (NRA) you will be entitled to the immediate payment of a pension and tax-free lump sum. Your NRA under the Scheme is age 60. This means that you can take your pension without reduction at any time from your 60th birthday. You may be aware that the Government abolished the Default Retirement Age of 65, i.e. the age at which an employee could be legitimately forced to retire from employment by his or her employer, from 1 October 2011. To clarify, your NRA under the Scheme was unaffected by this change in law. The Scheme has complied with age discrimination legislation from its introduction on 1 December 2006. As a member you have a right to continue your active membership of the Scheme until you leave employment with SE, i.e. you can continue to build up benefits after your NRA, if you wish. If you wish to continue to earn benefits after your NRA you will need to either participate in PSE (if you are eligible, see page 6) or pay contributions direct to the Scheme from your notional salary (see Doing it yourself on the next page to estimate benefits to the age you actually wish to retire, not just to NRA 60). If you wish to continue to earn benefits after your NRA you will need to remain an active member of the Scheme. The pension you receive when you actually retire will then be based on the larger of: Your pensionable service at that late retirement age x Final Pensionable Salary at that date x 1/80; or Your pension at NRA increased to reflect the period of postponement plus pensionable service from NRA to your late retirement date x Final Pensionable Salary at that date x 1/80. If you continue in service working for SE beyond your NRA but no longer wish to remain in the Scheme, you may opt out of the Scheme either at, or after your NRA. The payment of your benefits will then be deferred until you leave service with SE. The Trustees will increase your benefits to reflect the period of postponement from NRA (or date of opt out if later). The increase will be based on a late retirement factor calculated by the Scheme Actuary. You will not be covered for life assurance benefits from the date you leave Pensionable Service and you will not be able to draw your benefits until you leave employment with SE. Pension payments on your death after retirement On your death after retirement, your Beneficiary will receive a pension for the remainder of their lifetime. Any Eligible Children may also receive a pension (to age 23 at the latest). See Death After Retirement on page 23. Partial retirement Would you like to gradually wind down by reducing your weekly hours of work as you approach retirement? Or have you reached the Scheme s NRA but want / prefer to continue working on a part time basis? The option to take partial retirement allows you to draw part of your pension and take a lump sum while still working for SE and continuing to build up benefits in the Scheme. Further information on partial retirement can be found in the Scheme booklet entitled Guide to Partial Retirement. The benefits that you receive if you remain in the Scheme are guaranteed to be at least equal to those that you would have received if you had opted out of the Scheme. 12
Save Calculating your Retirement Benefits Doing it yourself: Retiring at NRA My estimated benefits Let s use an individual example. A member retires at NRA after 35 years Pensionable Service with a Final Pensionable Salary of 26,000. This member would receive an initial pension of 11,375 and tax-free lump sum of 34,125. Please fill in the blanks to estimate your Scheme benefits at retirement. Pension 1/80 x 26,000 x 35 years: 11,375 a year Plus cash 3/80 x 26,000 x 35 years: 34,125 lump sum Estimated pension 1/80 x ( ] x [ years]: Estimated tax-free lump sum 3/80 x [ ] x [ years]: cash years My estimated years of Pensionable Service at retirement: My estimated Pensionable Salary at retirement: a year cash 13
Save Increasing your benefits Additional Voluntary Contributions (AVCs) are one of the many ways to save for your retirement and they come with tax advantages. This means that, for example, if you pay income tax at 20%, each 100 saved through AVCs costs you only 80 (tax year 2016/2017). If you pay tax at the higher rate you will save even more. Please refer to the following website for more details https://www.gov.uk/ government/publications/rates-and-allowancesincome-tax/income-tax-rates-and-allowancescurrent-and-past. You may start or change your AVC contributions at any time. The payment of AVCs under the Scheme allows you to buy extra years of Pensionable Service. You can increase your benefits by paying up to 9% of your notional salary where payments are paid on a 4 weekly basis or at the end of the financial year. From April 2006, in addition to, or instead of, paying AVCs you can make pension contributions to a stakeholder or personal pension plan of your choice. If you would like to obtain an AVC quote, please contact Hymans Robertson direct on 0141 566 7830 or at scenadmin@hymans.co.uk. Alternatively please contact a member of the SE HR Customer Delivery team to enquire further on 0141 228 2323 or hrcustdeltm@scotent.co.uk Let s talk about how much pension you ll need First, it depends on when you want to retire remember early retirement equals less time to save plus more years to spread the pension over. Why not think about how much you spend now each month and the lifestyle changes you want to make when you retire? Now look at your latest pension statements and any other savings. Are the income figures different? Will you have the income you want? If not, you ought to think about making AVCs. Take a look at pages 10 and 15. Help point Each year the SE Administration Team at Hymans Robertson produce a benefit statement for you to access via e-payslips. Please review your statement carefully and if you have any questions contact the SE Administration Team at Hymans Robertson. Please note all contributions, tax relief and benefits are subject to HMRC limits. You will be informed if restrictions apply to you. Now look at how much to pay We can t tell you how much to save and it s very hard to predict how much you will have built up in the Scheme at retirement and what pension your other savings will buy. The golden rule is start early and keep a close eye on your total pension wealth as you approach retirement. In fact, you may be able to pay up to 100% of annual earnings towards any number of pension schemes or contracts but you must keep to the 15% maximum contribution between the main Scheme (6%) and the Added Years AVC option (up to 9%). Want to know / do more? Contact SE HR Customer Delivery team or the SE Administration Team at Hymans Robertson. 14
Save AVCs the Added Years option You pay additional contributions to the Scheme and in return you get extra years of Pensionable Service added to your benefits when calculating your pension and lump sum at retirement or death in service. This means you will get a bigger pension and tax-free lump sum. Your added years of service will be shown on your annual benefit statement. Saving more outwith the Scheme There are ways for you to save more outwith the Scheme with your own personal arrangements (e.g. a pension with an insurance company). More details can be obtained by visiting www.moneyadviceservices.org.uk or from their consumer helpline 0300 500 5000. Want to know / do more? Contact SE HR Customer Delivery team or the SE Administration Team at Hymans Robertson 15
Live Leaving the Scheme Less than one month of Pensionable Service If you have less than one month of service, you will automatically be given a refund of contributions you paid direct to the Scheme if you were not participating in PSE. You will not be able to leave them within the Scheme or transfer them elsewhere. Between one and three months of Pensionable Service If you have between one and three months of service and you participate in PSE you are not entitled to any pension benefits. If you have between one and three months of service and contribute directly to the Scheme (i.e. not through PSE) you will automatically receive a refund of the contributions you paid. More than 3 months but less than 2 years Pensionable Service If you have more than three months but less than two years Pensionable Service, and you have not transferred benefits from another arrangement into the Scheme (not currently permitted), you have the following options: 1. if you were not participating in PSE, a refund of any contributions you paid direct to the Scheme; or a transfer of your benefits to another suitable arrangement. 2. if you were participating in PSE, a transfer of your benefits to another suitable arrangement. Contribution refunds will not include any amounts paid to the Scheme by the employer. If you want to transfer your benefits, you will have to make your decision within three months of receiving your options letter. If no response is received any refund entitlement will be processed automatically. More than two years service If you have completed at least two years Pensionable Service, your benefits in the Scheme will be preserved in the Scheme automatically. You will receive them when you reach your NRA. If you change your mind, you can transfer your preserved benefits out of the Scheme before payment is due. Your preserved benefits are paid at your NRA, but benefits may be paid at a reduced rate from normal minimum pension age (currently 55) if SE and the Trustees give their consent (see page 21 Voluntary early retirement ). If you are retiring due to incapacity you may be able to draw unreduced benefits from an earlier age. Under law the earliest age at which pension savings can be accessed (unless you are retiring due to incapacity) will increase from 55 to 57 in 2028, when the State Pension Age increases to 67. To help offset the effects of inflation your preserved pension will be increased each year from the date you leave the Scheme to the date you retire. This will be in line with the percentage increase annually announced by the Government and currently determined by the Consumer Prices Index. However, the basis of this increase is not guaranteed and is subject to change in the future. Leaving the Scheme your rights and options Once you join the Scheme you are not compelled to continue accruing benefits until you retire. You are free to leave the Scheme at any time (known as opting out of Pensionable Service) provided you give the Trustees one month s notice. If you remain in service with SE but you opt out of the Scheme, i.e. leave Pensionable Service, you must defer taking your benefits until you leave employment with SE. 16
Live Death before retirement with preserved benefits If you die with preserved benefits in the Scheme and before your pension starts, your Beneficiaries or estate could receive a: Lump sum death benefit The lump sum death benefit is the preserved cash sum benefit (as per your leaver s statement) which is based on your Pensionable Service and Final Pensionable Salary at date of leaving the Scheme. Additionally, your Beneficiary and / or Eligible Children may be entitled to: Beneficiary s and / or Eligible Children s pension benefits If you have qualified for a preserved benefit a long term pension is payable as follows: If there are Eligible Children but no Beneficiary there will be a pension payable of: Example 1/3 of your pension if there is one Eligible Child; or This member has completed 12 years Pensionable Service to his date of leaving the Scheme and had a Final Pensionable Salary of 26,000. 2/3 of your pension if there are two or more Eligible Children. The member s benefits at date of leaving were calculated as: If the value of the benefits payable to your Beneficiary and / or Eligible Children is very small it may be available as a lump sum. The amount will be advised if available. Cash 3/80 x 26,000 x 12 years: 11,700 Pension 1/80 x 26,000 x 12 years: 3,900 p.a. The member dies 6 years later and his benefits increase each year in line with the percentage increase annually announced by the Government. Currently, increases are determined by the Consumer Prices Index (CPI) from the date of leaving to the date of death (however, please note that the level of increases are not guaranteed and may be subject to change in the future). Let s assume that CPI was 3% each year. 1/2 of your pension if you are survived by a Beneficiary only; 3/4 of your pension if you are survived by a Beneficiary and one Eligible Child in their care; or 11,700 x 1.03 for 6 years: 13,970 full pension if you are survived by a Beneficiary and two or more Eligible Children in their care. Eligible Children s pension benefits would be paid in addition if applicable. Cash Beneficiary s Pension 3,900 x 1.03 for 6 years x ½: 2,328 p.a. 17
Live Transferring and transfer values If you leave Pensionable Service having qualified for a preserved benefit, instead of leaving your benefits in the Scheme, you may ask the Trustees to make a transfer payment to another approved pension arrangement. You may exercise your right to a transfer by applying in writing to the Trustees before your NRA. At any time, whether you have left Pensionable Service or not, you may ask the Trustees for an estimate of the transfer value available to you on a particular date. Within three months of your request, the Trustees will give you a written statement of entitlement. The transfer payment will be a cash amount which the Scheme Actuary will calculate. The value will be equivalent to the value of the benefit you have earned in the Scheme. If you elect to take a transfer value your Beneficiary and / or Eligible Children will no longer be entitled to benefits from the Scheme. If you want to transfer to another approved pension arrangement, you must apply in writing to the Trustees within three months of the date shown on the statement of entitlement. If your transfer request is made outside of this period, the transfer value paid out may be more or less than the original quotation. The Trustees are not obliged to provide another statement within 12 months of the date of the last request. Further statements may be provided subject to an administration charge. Details are available from the SE Administration Team at Hymans Robertson. If the estimate of the transfer value is needed because of a divorce settlement, you should tell the Trustees this when asking for the estimate as the Trustees may need further information from you. Where can I transfer my benefits to? You have the option of transferring to your new employer, provided it is able and willing to accept it, or to a personal qualifying pension arrangement of your choice or to an individual insurance policy in your own name. In the past it has rarely been beneficial to transfer benefits from a defined benefit pension scheme, such as the SE Scheme, to a defined contribution (DC) pension scheme because of the significant certainty given up. However, the 2014 budget announced that from April 2015 members of DC pension schemes will no longer need to purchase an annuity on retirement. Instead, members will be able to draw freely from their funds, subject to payment of any marginal-rate income tax payable on amounts in excess of the tax free cash sum. For that reason, you may now feel that you might benefit from transferring to a DC pension scheme to access the new flexibility that DC pension schemes could offer. This will be a major financial decision as you will lose the certainty that is provided by a DB scheme. Transferring pension benefits between schemes is highly complex and anyone transferring from a DB pension scheme to a DC pension scheme is required by Government to take impartial advice from a qualified independent financial adviser (IFA) if the Cash Equivalent Transfer Value is over 30,000. The Trustees of the Scheme recommend that all members seek IFA advice before transferring benefits out of the Scheme regardless of the size of the transfer value. You can find further general information at www.moneyadviceservice.org.uk You can find a financial adviser in your area at www.unbiased.co.uk you will be responsible for paying for any resulting advice. Lost a pension? You might have worked for another company and left preserved benefits in its pension scheme. Unless that scheme has your current address it cannot give you the benefits you have earned. For more details go to Finding forgotten benefits on page 28. If you should leave please keep in touch. Giving the SE Administration Team at Hymans Robertson your new address or personal telephone number or email address would be very helpful. 18
Live Helping you in times of change There may be some circumstances under which your level of contributions will change. Whilst there are many different reasons for a leave absence generally these fall into two broad categories: paid and unpaid leave. Q What if I am on paid leave? A You will continue to accrue pensionable service during your period of leave. Q What if I am on unpaid leave? A During the period of unpaid leave you will not accrue pensionable service. With the agreement of SE, on return to work you may opt to increase your salary exchange to buy the pensionable service back. After 12 months of such absence, you will generally be treated as having left the Scheme although exceptions may apply at the discretion of the Trustees and SE. Types of paid leave* include: Types of unpaid leave* include: Sick leave Maternity leave Paternity leave Special paid leave Shared parental leave Adoption Sabbatical Career break Unpaid Parental leave Special unpaid leave *Please note, this list is not exhaustive. Whatever the reason for the leave of absence you will normally continue to be covered for death in service benefits regardless of whether you continue to contribute. However, there may be rare situations in which the insurance company will need information about your absence and may impose conditions on cover e.g. serving overseas with the armed forces. If you have any queries please contact the SE Administration Team at Hymans Robertson. 19
Live Ill health retirement giving you support If you are in ill health retirement If your employer and the Trustees agree that you have to retire because of permanent ill health, you will be entitled to immediate payment of your pension and tax-free lump sum, provided you have completed three months or more Pensionable Service. The amount of service used in the calculation will be increased to make up for the fact that you have had to retire early. The extra service awarded will vary depending on the length of Pensionable Service you have completed. The table below shows the total service including any enhancement that would be used to calculate your benefits. Pensionable Service Enhanced Service 3 months or more but less than 5 years No enhancement 5-10 years Double the Pensionable Service you have completed Over 10 years The greater of: 20 years; Note that the total Pensionable Service used to calculate your benefits, including the ill health enhancement, can be no greater than the Pensionable Service you could have completed had you remained in service to your Normal Retirement Age. As an alternative to the pension and lump sum, if you have more than one but less than two years Pensionable Service, it may be possible to pay all your benefit as a lump sum. If you wish to apply for an ill health retirement pension you should contact the Human Resources department who will obtain medical evidence from your GP and specialist consultant and may request that you attend a medical examination with an independent medical adviser. The information obtained from these advisers will be presented to your employer and the Trustees for consideration. Example This member has been granted an ill health pension at age 50 by the Trustees. Final Pensionable Salary at that date is 26,000 and the member has completed 9 years Pensionable Service. The member could have completed a further 15 years service up to Normal Retirement Age. The ill health pension was calculated as: Pension 1/80 x 26,000 x (9 years + 9 years equivalent period]: 5,850 each year Plus cash 3/80 x 26,000 x [9 years + 9 years equivalent period]: 17,550 lump sum and your Pensionable Service plus 6 years and 8 months 20
Live Early retirement giving you flexibility Early Retirement due to redundancy If you have reached normal minimum pension age and are made redundant you will qualify for immediate payment of your pension and tax-free lump sum. No reduction is applied for early payment. Voluntary early retirement You may retire from the Scheme with a pension from any age after reaching age 55. This requires the consent of the Trustees and SE and your benefit will be reduced to take into account early payment of your benefits and the increased time your pension would be paid. If you would like to consider this option you should contact SE Human Resources. Partial retirement What is normal minimum pension age? If you are age 55 or over you also have the option to partially retire early. The option to take partial retirement allows you to draw part of your pension and take a lump sum while still working for SE and continuing to build up benefits in the Scheme. This is the earliest age you can take your pension. This is currently aged 55 but likely to increase in the future. Further information on partial retirement can be found in the Scheme booklet entitled Guide to Partial Retirement. Guaranteed Minimum Pension ( GMP ) If you have transferred in contracted out benefits (not currently permitted) from service accrued in another scheme before 6 April 1997, the Scheme will have to provide you with a Guaranteed Minimum Pension ( GMP ). Your GMP is payable from State Retirement Age and is equivalent to the pension that you would have received from the state second tier arrangements had you not been contracted out. Early retirement may be restricted to ensure that your reduced pension will be at least equal to your GMP at State Retirement Age. If you require any further details or have any questions please contact the SE Administration Team at Hymans Robertson. 21
Live Death in service before retirement If you die before you retire and are an active member of the Scheme, the Scheme provides a lump sum death benefit, and where you leave a Beneficiary and / or Eligible Children, a long term pension may be payable immediately following death. When you joined the Scheme you should have completed an Expression of Wish Form to assist the Trustees in deciding who will receive the lump sum death benefits payable. Should your circumstances change you should advise the SE Administration Team at Hymans Robertson of any changes you would wish to make to the Nominated Recipient. Lump sum death benefit Should you die whilst an active member of the Scheme, a lump sum death benefit of 3 times your Pensionable Salary at the date of death is payable. If you are employed on a part time basis the lump sum that is paid will be calculated using the salary that you receive rather than your full time equivalent. There will be a slight reduction to the lump sum payable to male members who were in pensionable service before 1 July 1974 if a spouse s pension is also payable. Did you know? Beneficiary s and Eligible Children s pension If you have completed more than three months Pensionable Service a long term pension is payable as follows: 1/2 of the pension you would have been entitled to if you are survived by a Beneficiary only; 3/4 of the pension you would have been entitled to if you are survived by a Beneficiary and one Eligible Child in their care; or full pension if you are survived by a Beneficiary and two or more Eligible Children in their care. Lump sum death benefits can be paid quickly to your Beneficiary, Nominated Recipient or estate with no inheritance tax because they are kept by the Trustees under a discretionary trust. By signing an Expression of Wish Form (obtainable from the SE Administration Team at Hymans Robertson), you are letting the Trustees know to whom the lump sum death benefit could be paid. If there are Eligible Children but no Beneficiary there will be a pension payable of: 1/3 of the pension you would have been entitled to if there is one Eligible Child; or 2/3 of the pension you would have been entitled to if there are two or more Eligible Children. Long term pensions are payable based on enhanced service under ill health retirement rules subject to a minimum of ten years Pensionable Service (see page 20). If the value of the benefits payable to your Beneficiary and / or Eligible Children is very small, it may be available as a lump sum. The amount will be advised if available. 22
Live Death after retirement Beneficiary s and Eligible Children s pension If you die after becoming entitled to payment of retirement benefits, then the following benefits may be paid: Once you retire your pension benefits are paid for the rest of your life. Lump sum death benefit On your death after retirement your Beneficiary and / or Eligible Children will receive a pension. If you die within five years of retirement, a lump sum death benefit will be payable equal to 5 x your annual pension, less the total amount of pension already paid up to your date of death. The Trustees will decide to whom this lump sum is paid, but by signing an Expression of Wish Form (obtainable from the SE Administration Team at Hymans Robertson), you can let the Trustees know to whom you would wish it to be paid. Your existing pension will continue to be paid to your Beneficiaries and / or Eligible Children for three months after your death. This will be followed at the end of the three months by a pension payable as follows: 1/2 of your pension if you are survived by a Beneficiary only; 3/4 of your pension if you are survived by a Beneficiary and one Eligible Child in their care; or full pension if you are survived by a Beneficiary and two or more Eligible Children in their care. If there are Eligible Children but no Beneficiary there will be a pension payable of: 1/3 of your pension if there is one Eligible Child; or 2/3 of your pension if there are two or more Eligible Children. If the value of the benefits payable to your Beneficiary and / or Eligible Children is very small, it may be available as a lump sum. The amount will be advised if available. 23
Learn Important terms to understand Actuarial Valuation - performed every three years, this determines any surplus or deficit in the Scheme and the level of contribution required by SE in the future. Basic State Pension - is paid in addition to your pension from the Scheme. It is paid by the Government from your State Pension Age. The amount you receive will depend on your National Insurance contribution record. Beneficiary - Your Spouse or Cohabiting partner Eligible Children - means: A child of your marriage or your adopted child; or A child who is wholly or mainly dependent on you. A Child, unless physically or mentally incapacitated shall only be an Eligible Child if he or she is: Cohabiting partner - a person who jointly with a Member has made and signed a declaration in a form prescribed by the Trustees that the following conditions are met: Below age 17; or Is below age 23 and is in full time education or vocational training; or the person and the Member are free to marry or enter into a Civil Partnership; the person and the Member are living together as if they are a married couple; Is in full time education or training for a vocation or profession and qualified as an Eligible Child before 6 April 2006 (transitional protection). This is called automatic enrolment because it is automatic for staff you don t have to do anything to be enrolled into the pension scheme. Your employer will need to enrol you into a workplace pension scheme if you: neither the person nor the Member is living with a third person as if they are a married couple; and Your highest Pensionable Salary in any one of the five years before you retire (or leave); and either the person is financially dependent on the Member or the person and the Member are financially interdependent. The highest three consecutive years average Pensionable Salaries ending in the last ten before you retire (or leave). Are not already in one; Are aged between 22 and State Pension Age; Earn more than 10,000 a year; and Work in the UK Contracting out - Before April 2016 the Scheme was contracted out of the State Scheme. This meant members paid less in NICs and did not build up benefits in the State Second Pension (S2P formerly known as SERPS). Instead the Scheme pays you a minimum amount of pension for Pensionable Service completed before April 1997 known as GMP (see definition on page 25). Contracting out ended in April 2016 when the Government moved to a single tier Basic State pension. On an annual basis the Trustees will receive an actuarial report updating the last formal Actuarial Valuation figures to take account of the current economic climate. Automatic enrolment - Every employer with at least one member of staff has to enrol those who are eligible into a workplace pension scheme and contribute towards it. For more details on automatic enrolment, visit http://www.workplacepensions.gov.uk/ Final Pensionable Salary - means the greater of: About the State Pension To find out how much State Pension you have already earned and to obtain a forecast of what you might get call 0845 3000 168 or go to https://www.gov.uk/calculate-state-pension 24
Learn Guaranteed Minimum Pension (GMP) the Scheme must pay you a minimum amount of pension for Pensionable Service completed before April 1997. The GMP is at least equal to the benefits you would have received if you had not been contracted out of the State Second Pension (S2P formerly SERPS) to that date. Notional salary - is your annual salary before tax and reductions due to salary sacrifice arrangements. Your Pensionable Service for this period would be 1.7413 years: Pensionable Salary is your basic annual salary before tax and reductions for salary sacrifice arrangements (excluding bonuses, overtime and any other fluctuating amounts). 1. 1,040 1,820 0.5714 years 2. 780 1,820 0.4286 years 3. 1,300 1,820 0.7143 years Incapacity the test for ill health retirement - means any physical or mental impairment which prevents you from following your normal employment. SE and the Trustees must both provide consent for you to retire because of Incapacity. In coming to their decision, they will consider the medical opinion of your medical adviser and may request that you also visit an independent medical adviser. If you have any periods of part time service, your Pensionable Salary for those periods will be amended to the equivalent full time Pensionable Salary except for when calculating any lump sum death benefits. Member means a person who has joined the Scheme. This includes a former employee if entitled to benefits from the Scheme (known as a preserved member). A member currently participating in PSE or making contributions direct to the Scheme from notional salary is known as an active member. Pensionable Service is the number of complete years and complete months of service, whilst participating in PSE or making contributions direct to the Scheme from notional salary, plus any additional service transferred in from a previous pension scheme or bought by additional contributions. Nominated Recipient means: If you are a part time employee your Pensionable Service will be calculated as a proportion of the service which a full time employee would have earned in the same post. For example, let s assume that you work 20 hours a week (1,040 hours a year) in year 1, 15 hours a week in year 2 and 25 hours a week in year 3 in a post which has full time equivalent hours of 35 (1,820 hours a year). Your Beneficiary; and / or Any person to whom you wish any lump sum death benefit to be paid and whose name and address you have notified to the Trustees in writing (by the completion of an Expression of Wish form or otherwise). If you participate in one of the SE salary sacrifice schemes then your pensionable salary will be your notional salary. 1.7143 years Although you have completed 3 years Pensionable Service, the service which would be used to calculate your pension and lump sum would be 1.7143 years. However, all benefits are calculated using your equivalent full time salary for pension benefits. Pension Salary Exchange - a salary sacrifice arrangement where your pay is reduced and the company pays your contribution into the Scheme directly. Normal Retirement Age (NRA) - This is age 60. 25
Learn Scheme means the Scottish Enterprise Pension & Life Assurance Scheme. Spouse means the person you are married to or in a civil partnership with at the date of your death, provided that at the start date of any Spouse s pension payable from the Scheme: he / she is not divorced from you; your civil partnership has not been dissolved; he / she is not separated from you in terms of a legal separation agreement; he / she is not living with another woman / man as spouses or civil partners; or he / she has not remarried or entered into a new civil partnership (other than remarriage, or civil partnership to you). State Pension Age is the age at which the State Pension is payable. Please see the notes on page 10 for further information. Trustees are persons appointed by SE or nominated by members who are responsible for administering the Scheme in your best interests and according to its rules, pension regulations and legislation. If a Spouse is 15 years or more younger than the Scheme member, the Spouse s pension will be reduced. State Pension - is regular payments which you can receive from the Government when you reach State Pension Age by paying National Insurance Contributions (see www.gov.uk/state-pension for more details). 26
Learn Useful information If a dispute arises, a formal procedure exists known as the Internal Dispute Resolution Procedure. The Trustees have appointed the Secretary to the Trustees, Hymans Robertson LLP to be the first point of contact at scenadmin@hymans.co.uk to handle disputes relating to the Scheme. If you are not satisfied with the ruling you can ask the Trustees to reconsider. Alternatively or in addition, the following bodies exist to help you: www.pensionsadvisoryservice.org.uk www.pensions-ombudsman.org.uk www.thepensionsregulator.gov.uk The Pensions Advisory Service is a Government service which gives free advice to anyone wanting help with their pension whether planning ahead, approaching retirement or retired. TPAS will appoint an independent local representative to give help and advice on any matter concerning pension schemes. Only if the issue cannot be resolved, should the Pension Ombudsman be contacted: The Office of the Pensions Ombudsman A further body known as the Pensions Regulator exists to monitor the running of pension schemes. The Pensions Regulator looks into and can take action when any potential irregularities are brought to its attention. The Pensions Regulator can be contacted at: The Pensions Advisory Service (TPAS) 11 Belgrave Road London SW1V 1RB 0300 123 1047 11 Belgrave Road London SW1V 1RB 020 7630 2200 The Pensions Regulator Napier House Trafalgar Place Brighton BN1 4DW 0870 606 3636 27
Learn Keeping watch Other information available Pensions and divorce or dissolution Finding forgotten benefits As a member of the Scheme you are entitled to other information detailed below. Myner s Adherence Document. Contact: Schedule of Contributions. The Pension Tracing Service The Pension Service Tyneview Park Whitley Road Newcastle Upon Tyne NE98 1BA 0845 6002 537 www.direct.gov.uk/pensiontracing Statement of Funding Principles. Statement of Investment Principles. You should note that your pension entitlement may be affected as part of any divorce or dissolution settlement. In particular, some of your benefits may be paid to your ex-beneficiary rather than to you. If you require any calculations to be made as part of divorce proceedings, you should contact the SE Administration Team at Hymans Robertson. Your circumstances will be treated confidentially. You should note that there are charges for carrying out such calculations and these will be invoiced directly to you. Trust Deed and Rules. Amendments to Scheme Trustees Annual Report and Accounts (members receive a summary report automatically). Changes to the Rules of the Scheme can be made at any time by the Trustees and SE, provided that there is no reduction to benefits already accrued to Scheme members. The Scheme is registered with the Pension Schemes Registry. This service is free and helps you trace any lost pension arrangements from before you joined SE. Scheme information Actuarial Valuation Report. Scheme information is available to read free of charge. A fee may be charged if a copy is required. Personal information Pension benefit statement. Transfer out valuation. Summary funding statement (members receive a copy of this statement annually). These are available to you once a year free of charge. For assistance in obtaining any of this information please contact the SE Administration Team at Hymans Robertson. 28
Learn Who do I contact for more information? This is a summary of the benefits provided by the Scheme. Full details in all matters are contained in the Trust Deed and Rules. If you would like further information about the Scheme and your benefits, please contact the SE Administration Team at Hymans Robertson: Hymans Robertson 20 Waterloo Street Glasgow G2 6DB Tel: 0141 566 7655 Email: scenadmin@hymans.co.uk 29
Learn Got more time on your hands?...take a look at what you can do www.u3a.org.uk http://www.voluntaryarts.org www.charityjob.co.uk 30