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The new scheme will see further flexibility with a
50/50 option. It has been introduced in the Scheme
to encourage members who might otherwise opt-out
because of financial difficulties to stay in the Scheme
and save for retirement. You can elect for this
option at any time. You would pay half your normal
contributions and build up half your normal pension.
How does 50/50 work?
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in the 50/50 section, you will only be building up
half the normal pension. However, the amount
of life cover and ill-health cover you get from the
Scheme are unaffected. If you have more than one
employment you can elect for the 50/50 option in
one, some or all your employments.
Your employer will enrol you back into the main
section every 3 years, however, you can choose to
revert back to the main section of the Scheme at any
time by informing your employer in writing. You will
then start to build up full benefits in the main section
from your next available pay period.
There are two sections in the Scheme from 1st April
2014 - the main section and the 50/50 section.
The main section of the Scheme is the section you
will be placed in. In that section, you pay normal
contributions and get the normal pension build up.
Example
The 50/50 section is a new option. You will be able
to elect to move to this section if you wish at any
time. An election to join this section must be made in
writing to your employer. If you choose this option,
you will then pay half contributions but, whilst you are
Rashda however, is finding it difficult financially and
she has decided to elect to take up the 50/50 option.
Rashda works full time and her actual pay is £24,500
a year, her contribution rate in the main section of the
Scheme is 6.5%.
Main section compared to 50/50 section for one year in the Scheme
Main Section
50/50 Section
Gross contribution in the main section
(for 1 year)
6.5% = £1,592.50
Gross contribution in the 50/50 section
(for 1 year)
3.25% = £796.25
Pension build up before revaluation
in the main section (for 1 year)
£500 for each year in Retirement
Pension build up before revaluation in the
50/50 section (for 1 year)
£250 for each year in Retirement
Lump Sum Life Assurance Cover
£73,500
Lump Sum Life Assurance Cover
£73,500
Full ill health cover
Full ill health cover
Rashda would pay less in contributions in the 50/50 section - 3.25% instead of 6.5% and she would build up
half the pension in the 50/50 section, £250, payable every year in retirement, compared to a pension of £500
if she was in the main section.
But remember, the value of any lump sum life assurance cover payable (three times annual pensionable
pay) and ill health cover remains the same regardless of which section of the Scheme you pay into.
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to pay
Contribution
Option
New
to the Scheme
If you want to make additional pension savings
to increase your pension benefits, there are two
tax efficient ways to do so from April 2014. These
are Additional Voluntary Contributions (AVCs) and
Additional Pension Contributions (APCs).
Additional Voluntary
Contributions (AVCs)
AVCs allow you to pay more to build up extra savings
for retirement. From 1st April 2014 your contributions
to an AVC arrangement will no longer be limited to
50% of your pay, so you can, if you wish, pay up to
100% of your UK taxable earnings towards an AVC.
However for new contracts taken out from 1st April
2014 onwards the maximum amount which you
can take as tax free cash is 25% of your AVC pot.
Any existing contracts which were taken out before
April 2014 still have the option of taking up to 100%
of your AVC pot as tax free cash (subject to HMRC
limits) but the contributions to such contracts are
limited to a maximum of 50% of your pensionable
pay (as defined in the 2008 scheme).
Our AVC providers are:
Prudential - 0845 607 0077
Scottish Widows - 0845 7330804
If you are considering AVCs as a short term boost
to your pension benefits, please be aware that the
Prudential apply exit charges to AVC policies of less
than 5 years duration at the point that retirement
benefits are taken.
Additional Pension
Contributions (APCs)
You can buy extra pension by paying additional
pension contributions regularly, over a period of time,
or you can buy extra pension by paying in a one-off
lump sum. The maximum amount of additional pension
you can buy from April 2014 is £6,500 (this figure will
increase each year in line with the cost of living).
The amount it costs depends on how much extra
pension you want to buy, the age you start paying
the extra contributions and the length of time you
want to pay them for. In the new scheme you can
only buy extra pension for yourself and not for
additional dependants’ benefits.
Qualification for Benefits
The period of time you have to pay into the Scheme
in order to be entitled to a pension will increase from
3 months to 2 years.
If you have less than 2 years when you move into
the new scheme and leave or opt out, you will
have the option of taking a refund of contributions
(unless you are unable to have a refund because
you are already entitled to a benefit in the LGPS)
alternatively you may have your benefits preserved
in the pension scheme. If you haven’t made an
election within 6 months of leaving the Scheme,
and you have 3 months membership or more when
you leave, you will automatically be entitled to a
Preserved Benefit.
However upon entering the new scheme you must
have 2 years membership to be awarded a pension
benefit for reasons of redundancy/efficiency or ill-health.
Co-habiting Partners
From April 2014 you are no longer required to
nominate your cohabiting partner to receive
a pension upon your death. However certain
conditions still have to be met, such as;
• you have been free to marry each other
or enter into a civil partnership with each
other AND
• you have lived together as if you were
husband and wife or registered civil
partners AND
• neither of you have been living with
someone else as if you were husband
and wife or civil partners AND
• your financial affairs have been
interdependent (or the cohabiting partner
has been financially dependent upon you);
for a continuous period of at least 2 years prior
to the date of death.
On your death, we will need to be satisfied that
your relationship met the qualifying conditions for
the payment of a cohabiting partner