Age retirement
Premium pension scheme
Your pension benefits
How do you work out my pension?
We work out your pension as 1/60 of your final pensionable earnings for
every year of reckonable service in the scheme. See the next sections to
find out how we work out ‘final pensionable earnings’ and ‘reckonable
service’.
For example
Mohammed leaves the premium scheme after 20 years’ reckonable service. His
final pensionable earnings are £18,000 a year.
Mohammed‘s premium pension = 1/60 x 20 x £18,000 = £6,000 a year.
What are ‘final pensionable
earnings’?
Your final pensionable earnings will be whichever the best is:
-
your last 12 months‘ pensionable earnings (not including bonuses);
-
the highest pensionable earnings (not including bonuses) you have had in
any of the last four full tax years; or
-
your highest average pensionable earnings including any pensionable
bonuses (this method is based on your average pensionable earnings over
three tax years in a row, and we will look back up to 13 years); We will
take account of inflation when doing this.
For most people, final pensionable earnings will be their pensionable
earnings in their last 12 months of service. If you have an unusual
earnings pattern with earnings peaking before you retire, one of the other
definitions above, which look at earlier periods of service, may give a
better result.
What is a year of
‘reckonable service’?
If you work full-time, every year in the pension scheme counts as a year of
reckonable service. If you work part-time, each year you work will buy a
proportion of a year of reckonable service. The maximum number of years
that can count for a pension is 40.
Do I get a tax-free lump sum?
You can opt to give up part of your pension for a tax-free lump sum. The HM
Revenue & Customs limits the amount of lump sum (typically up to 2¼
times your pension, increasing to 4 2/7 times your pension from 1 October
2007). We will reduce your pension by £1 p.a. for every £12 you take as
lump sum.
The maximum lump sum will be increased from 1 October 2007. We have
produced a calculator which shows the maximum lump sum for a given amount
of pension and the effect that taking a lump sum would have on your
remaining pension, for those taking their pension from 1 October 2007
onward..
Lump sum calculator [XLS] This calculator uses
Microsoft Excel. If you do not have Excel, ask your pensions administrator
helpline to do the calculation for you.
When can I draw my pension?
The scheme has a pension age of 60; this is the earliest that you can
usually take your pension without it being reduced for early payment.
Can I carry on working after I draw
my pension?
If you work on beyond age 60, you cannot draw your pension until you
retire.
Will you increase my pension
We will increase your pension every year in line with the rise in the
Retail Prices Index (RPI).
What about State benefits?
You will receive a basic state pension based on the years when you have
paid National Insurance contributions. However, as the scheme is
‘contracted out’, you will not receive the state second pension (S2P) as
well.
Can I pay more for a bigger pension?
You have a range of options:
-
You can pay extra contributions every month to buy extra years of
service. These are called ‘added years’.
-
You can pay Additional Voluntary Contributions (AVCs) to Equitable Life,
Scottish Widows, or Standard Life who are our AVC providers. The AVC
provider will invest your contributions in the fund of your choice. When
you retire, the AVC fund will buy you an additional pension.
-
You can contribute to a Stakeholder pension. You can choose our
designated provider, Standard Life, or any other provider. Stakeholder
pension’s work in a similar way as AVCs except you can take up to 25% of
your fund as a tax-free lump sum when you retire.
-
You may wish to save in other ways, for instance through an ISA
For more information about boosting your pension, see the
premium pension scheme [PDF 3.15MB, 24 pages] booklet.
For further information, see the page
boosting your pension.
