Police Pension Scheme 2015: What You Need to Know

1. Police Pensions User Group13th February 2015

2. Agenda

3. Police Pension Scheme 2015

4. Police Pension Scheme 2015 • National Scheme (Administered locally) • Comes into force 1st April 2015 • Protections available • Regulations expected w/c 23 February

5. What’s New? • Career Average Revalued Earnings (CARE) pension • Registered with HMRC • Contracted out of S2P • Statutory status -Pension Benefits are protected and underpinned by Government -

6. What does it Cost? Police Authority contributes 21.3% • Contributions are Tiered • Tier 1 – Pensionable pay under £27,000 • Tier 2 – Pensionable pay more than £27,000 but less than £60,000 • Tier 3 – Pensionable pay of £60,000 and over 2.5% reduction for officers not entitled to ill health benefits

7. Pensionable Pay • Determined Under Part 4 of the Police Act 2003 • Included • Basic Salary • Temporary Promotion • London Weighting • Not Included • Overtime • Housing Allowance • Rent Allowance  

8. Scheme Benefits • “55.3ths Scheme” • No service cap • Pension for life with option to commute • Pension • 1/55.3 x Pensionable Pay • Option to Commute • Up to ¼ of Capitalised benefits at 12:1 • Part Timers • Pension calculated using actual pensionable pay

9. CARE Pension • Individual pension pot built up for each year of membership • Pay/accrual rate • Pay = Pensionable pay earned during year • Accrual Rate = 1/55.3th • Individual pot revalued each year • in line with CPI + 1.25% while active • CPI only while deferred • Individual pots added together and paid as one pension

10. CARE Pension PC Sumner – Accrued pension each year after the effects of 5 years’ increases Pensionable Pay: Pension Year 1: £34,000/55.3 = £614.83 + £7.69 + £7.78 + £7.88 + £7.98 + £8.08 = £654.24 Year 2: £34,340/55.3 = £620.98 + £7.76 + £7.86 + £7.96 + £8.06 = £652.62 Year 3: 36,000/55.3 = £650.99 + £8.14 + £8.23 + £8.34 = £675.70 Year 4: £37,254/55.3 = £673.67 + £8.42 + £8.53 = £690.62 Year 5: £37,254/55.3 = £673.67 + £8.42 = £682.09 £3,355.27 Member has the option to convert pension to lump sum

11. When can they get their hands on it? • Refund of contributions with less than 2 years service (through payroll if < 3 months) Otherwise • Normal Pension Age of 60 • Reduced pension can be paid from age 55 Or • Deferred Benefit payable from State Pension Age • Earlier but with reduction

12. Ill Health Pension Benefits • Two Tier System • Selected Medical Practitioner • Standard Ill Health Pension • Unable to carry out ‘Ordinary’ duties • Enhanced Top-Up Ill Health Pension • As above but can not undertake ‘Regular Employment’ • Not less than 30 hpw over 52 weeks • Assumed Pay

13. Ill Health Pension Benefits • Standard Tier • Calculated in exactly the same as an ordinary pension • Enhanced Tier • Less than 5 years service: Lesser of: • Pension multiplied by 3; or • ½ prospective service • More than 5 years service: • addition of ½ prospective service

14. Ill Health Example Expect Police Authority to have to pay cash into pension account • PC Summers • 5 years service (age 36) • Pensionable Pay = £37,254 • Standard Tier: • Pension: = £3,355.27 • Enhanced Benefits: • ½ Prospective Service to age 60 = 12 years • Pension = (£37,254 / 55.3) x 12 = £8,084.05 • Total ill health pension payable = £3,355.27 + £8,084.05 = £11,439.32

15. Death Benefits • Death Grant payable of 3 times pay • Irrespective of length of service • Death Grant Nomination Form • Adult Survivor Benefits • Spouse • Civil Partner • Nominated Cohabiting Partners • Children’s Benefits • Nominated Cohabiting Partners • Must have completed a joint declaration • Can be opposite / same sex couples • Financial dependence / inter-dependence • Free to Marry / enter into Civil Partnership • Period of 2 years cohabiting required (albeit Discretionary)

16. Adult Survivor Benefits • Death in Service • 50% of the Officer’s Enhanced Ill Health Pension • Death of Pensioner / Deferred Beneficiary / Opt Out • 50% of the Officer’s actual entitlement

17. Adult Survivor Benefits (Misc) • Remember: • Significantly younger Spouse / Civil Partner / NCP • Possible reduction to benefits • Marry / Civil Partner within 6 months of death • Possible reduction / non payment

18. Children’s Benefits Paid to: • Natural / Stepchild / Adopted Child / Dependent Child • Under age of 18 • Between 18 and 23 • In Full time education • For life • Disability • Benefits • 25% (Up to 50% if more than one child) • Same basis as ‘Adult Survivors’ benefits

19. Transfers Awaiting GAD Guidance

20. Increasing Benefits • Up to £6,500 extra pension can be purchased • Payments made • via lump sum if within 12 months of joining • by periodical payments • Can be stopped • Whilst on leave / assumed pay BUT …..

21. Increasing Benefits Awaiting GAD Guidance

22. Divorce Awaiting GAD Guidance

23. Bits I’ve missed ? • Early payment reductions • Ability to use lump sum to cancel actuarial reductions • Appeals • Internal Dispute Resolution Procedure • Medical Appeals • Leave of Absence • Maternity / Paternity / Adoption / Parental • Sick • Reserve duty • Jury Service • Injury Benefits All expected to follow existing processes

24. Members with Protection Protected officers • Older than 45 at 1st April 2012 (Both 2006 and 1987 Scheme) • Qualifying service of more than 20 years and older than 38 at 1st April 2012 (1987 Scheme) • Qualifying service of 15 years and older than 40 at 1st April 2012 (1987 Scheme) Service attributable to pre 2015 scheme retains final salary link Remain in current scheme until protection ends

25. What happens with pre April 2015 service? • Ordinary pension or deferred • Pre April 2015 benefits calculated with reference to final salary • May be entitled to lump sum or higher commutation rates • Ill Health Pension • Pre April 2015 benefits calculated with reference to final salary • No entitlement to lump sum (NPPS) • Adult survivor benefits • Pre April 2015 benefits calculated by reference to final salary • No entitlement to lump sum (NPPS)

26. Next Steps • Regulations • Assessment of draft regulations complete • Issues raised with Home Office • Awaiting final regulations and associated guidance • Pensions Administration System • Requirements passed to Heywood • System programmed • Tested • Member Communication • Registration

27. Any Questions ?

28. Agenda

29. Disclosure Regulations13 February 2015

30. Background • The Occupational and Personal Pension Scheme (Disclosure of Information) Regulations 2013 • Effective from 6 April 2014 • Consolidate the disclosure requirements contained in- • The Occupational Pension Schemes (Disclosure of Information) Regulations 1996 • The Personal Pension Schemes (Disclosure of Information Regulations 1987

31. Key changes • Simplify the structure and language of the disclosure regime • Simplify some of the basic information that must be provided to new and prospective members • Clarify how electronic communications may be used

32. The regulations DO NOT apply to- • Pensions sharing on divorce • Pensions on Divorce etc (Provision of Information) Regulations 2000 • Transfer values • The Occupational Pension Schemes (Transfer Values) Regulations 1996

33. Summary of disclosure requirements • Basic scheme information • Members, prospective members, spouse, civil partner and scheme beneficiary • Automatically for new joiners • Within 2 months of joining the scheme (and in advance where practicable) • On request, no more than once a year • Within 2 months of the request being made

34. Summary of disclosure requirements • Any material change in basic scheme information must be notified to all members and beneficiaries before, or as soon as possible after the alteration (and in any event within 3 months) • Scheme member guide should contain at the very least, all the basic scheme information • Home Office expect guide to be available this month

35. Notification to scheme members You must send a notification to officers- • moving to the new (2015) scheme • Within 2 months (in advance where practicable) • remaining in the 1987 or 2006 scheme • Within 3 months (in advance where practicable)

36. Annual Benefit Statements • 2015 Scheme • Automatic for active members of 2015 • By 31 August 2016 • On request for deferred and pension credit members • Within 2 months of request • 1987 & 2006 scheme • On request for all membership types (within 2 months)

37. Summary of disclosure requirements • Pension Savings Statement • Members • Automatically to those who exceed the AA • By 6 October following the end of the tax year • On request • Within 3 months of the request or by 6 October, if later

38. Methods of Disclosure Disclosure regulations were amended in 2010 and again in 2014 to enable electronic communication Information and documents can now be disclosed- • By post • By email or • By website

39. Disclosure by electronic means Before information is provided electronically there are important steps and safeguards that must be met. These include- • Scheme members and beneficiaries being provided with the option to opt out of receiving information electronically by giving written notice • Scheme managers being satisfied that the electronic communications have been designed: • So that the person will be able to access and either store or print the information and • Taking into account the requirements of disabled people • Ensuring that members and beneficiaries who were members or beneficiaries on 1 December 2010 (where you had not provided information electronically before that date) have been sent a written notice (other than via email or website), informing them that: • It is proposed to provide information electronically in the future and • Members and beneficiaries may give written notice to opt out of receiving information electronically

40. Registering the scheme with HMRC

41. How can Mouchel help?

42. How can Mouchel help? • Mouchel will provide a report listing all members- • Protected, unprotected and tapered • Can provide specimen template letters • New website - myownpension.co.uk • Section for each scheme • 1987, 2006 & 2015 • Includes scheme member guides

43. myownpension.co.uk

44. Penalties for non-compliance The 2013 Disclosure Regulations make it very clear that while scheme managers may delegate the task of sending out information to third parties (e.g. a scheme administrator), they are the ones who remain ultimately responsible for ensuring compliance. Failure to comply with the regulations can result in a fine, imposed by The Pensions Regulator and can be up to £50,000.

45. Any Questions ?

46. Agenda

47. Police Pension Scheme Governance • Assisting the Scheme Manager with: • Compliance with legislation • Compliance with the requirements of the Pensions Regulator • Other matters as the Regulations may specify

48. Police Pension Scheme Governance Terms of Reference • Final copy almost ready to go to Scheme Managers for approval • Certain areas need final discussion before we can complete

49. Police Pension Scheme Governance Terms of Reference • Rolling appointment periods to ensure continuity of knowledge • Fees and expenses • Schemes covered • Indemnity Insurance

50. Police Pension Scheme Governance Education • Knowledge & Understanding? • What is necessary on day one? • Initial training offered by ACPO, Mouchel, other parties • The Pensions Regulators toolkit http://thepensionsregulator.gov.uk/public-service-schemes/learn-about-managing-public-service-schemes.aspx#s16691