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Company/Personal Pensions

Type of Schemes

Contracted in or out?

How pensions are paid

Pension increases


Previous pensions

In case of death

The total fund value of your pension/s and AVC funds cannot exceed £1M. If the fund does, or can be expected to exceed the relevant amount by the time you wish to retire you should consult your pension administrators for advice. The fund value of a final salary scheme is calculated by multiplying your gross annual pension by 20. For money purchase schemes the fund is as quoted by the fund manager.

Up to 25% of your pension fund value may be taken as tax free cash. After taking the cash your pension fund will provide a lower pension. The reduction will depend on your age and on the rules applied by the trustees. You should check how taking the cash affects any dependent's pension.

You may continue to work and take your pension.

You may contribute up to 100% of your earnings into a pension scheme with tax relief.

Your options - take the full pension or take a smaller pension and a tax free lump sum

These options are not available to civil servants, NHS employees, teachers, police and other government pension scheme members - in addition to the above options you can choose to take some or all of the value of your pension as alump sum (taxable) or defer buying a pension re-invensting pension pot (income draw-down).

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Your Pension Statement
Is all the detail correct and is the pension what you expected?

Check that the your personal details are correctly recorded

Name and address

Date of birth

Date started in service or scheme

Date of leaving

Marital status with name of spouse or Civil Partner and children

Details of bought in service from other company schemes

If you are in a final salary scheme, how is final salary defined? What is excluded, eg. overtime?

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What type of scheme do you belong to?

Salary related (defined benefit)

Your pension is calculated by multiplying your years in the scheme with your final salary or career average salary and divided by the accrural rate. 
Check the accrual rate in your scheme.

Money purchase (defined contribution)

You alone or you and your employer together have put money into a fund. The size of the fund and its investment performance will determine the value of your pension pot. The fund can fluctuate in value with stock market movements.
All AVC funds are money purchase.

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State make up
In some schemes the pension is reduced when you reach State Pension age and take your State Pension. It means that your income will not increase by very much at State Pension age but effectively you have enjoyed a better pension up to that time.

Check in your pension booklet to see if this applies to your scheme.

Your options from age 55

-Take the full pension

-take up to 25% of the value of pension pot tax free with smaller pension

-take all/some of your pension pot in cash instead/as well as buying a pension*

-use your pension pot like a bank account with drawing as needed (25% tax-free), investing the balance.

* does not apply to Civil Service, NHS, Teachers, Firemen, Police and other government schemes and you may be able to take your pension and/or lump sum and continue working for your employer if they agree.


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How is your pension paid?
Schemes may pay on the same day as your salary has been paid or there may be a different payment day. Check this in case your bank balance is 'compromised' soon after you leave!

Many schemes do not send out payslips every month because of the cost. You may only get one when your pension varies by more than a certain amount from the month before.

Tax office
Check if your tax office will change when you go on to pension.

Changes in your circumstances
Make sure your pension scheme administrators know if you have changed address or marital status. If you change the account to which they transfer the pension, let them know.

Your pension will be taxed according to the tax code issued by the Inland Revenue. If this is wrong you may pay too much or too little tax. It is up to you to check your coding.

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Pension increases
How is your pension increased each year. Private sector schemes must be increased by a minimum amount by law, usually a minimum of 2.5% or CPI whichever is the lower. Some private sector schemes also top up the payment to approach or match inflation. The top ups are at the discretion of the trustees of the scheme and are not automatic. You should be able to see a record of increases if you ask.

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Additional Voluntary Contributions
If you join a company pension scheme but would like to improve the amount you will receive in pension, you can consider making Additional Voluntary Contributions (AVCs). This may be a scheme provided by your employer or one of your own choice - Free Standing Additional Voluntary Contributions, (FSAVCs).

If you take out a FSAVC with an insurance company, there will be costs for setting up the scheme. If you take out AVCs through your company provider, the costs may be lower or the company may pay them for you.

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Pensions from previous employers
If you have deferred pension/s from previous employers get a statement from them indicting what pension might be payable, when it can be paid, if there are any commutation rights, in other words the same questions you ask of your current company scheme.

If you have lost track of the company with whom you had the pension, they have ceased to trade or have gone bankrupt you can still find the pension from one of the following addresses.

The Pension Tracing Service
Tel 0800 731 0193

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In case of death
Check that the beneficiaries you have nominated in both your current and previous pensions are still according to your wishes. This is especially important if your personal circumstances have changed, perhaps due to marriage, entering a civil partnership or divorce. The 'Expression of Wish' or 'Nomination' form should be filled in. This indicates to the trustees who you wish to benefit from any payments due from the pension fund in the event of your death. You can change it at any time.

Dependents pensions
When a pensioner dies, the surviving adult dependent will normally receive a dependents' pension. In most schemes this is 1/2 of the employee's pre-commutation pension. (See also the 5 year guarantee)

NOTE. In most schemes it does not affect dependants' pensions if you commute and take a cash sum, but check your own scheme - there are some variations.

This pension will normally be paid to a spouse and sometimes to a partner. Some schemes only pay to those who are legally married or are civil partners. Check your own scheme. There may also be restrictions if the partnership is of short duration or if there is a large age difference. Children may also benefit from a dependents pension if they are below a certain age. Check your booklet.

5 year guarantee
Most pensions are guaranteed to be paid for 5 years after a person retires. This means that if a pensioner dies within the 5 years, the balance of money which would have been due is paid to the surviving dependent as a tax free sum. The dependant’s pension normally starts on death. There can be variations, check your own scheme arrangements.

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The Retirement Counselling Service Ltd

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8 High Street
Bucks HP22 6EA