How are Early
Retirement benefits calculated?
Early retirement benefits are calculated by revaluing your accrued deferred pension as at your date of leaving/retirement date to your Normal Retirement Date (NRD) and then reducing that estimated pension at NRD by the appropriate early retirement factor (currently 5.75% a year compound). The reduction is not a penalty but simply reflects the longer time the pension is paid. For Senior members with a Normal Retirement Age of 60, pension accrued after 1 July 2011 is only payable from 65 unreduced.
Deferred pensions increase in deferment in line with price inflation over complete years of deferment, but subject to certain limits. Pension earned before 6 April 2009 will not increase by more than 5.00% per annum. Pension earned after 5 April 2009 will not increase by more than 2.50% per annum. When estimating retirement pension figures we assume the preserved pension increases by assumed inflation of 2.40% per annum for future years. If future inflation is lower than this assumption the actual amount payable will be less. Inflation is currently assessed using the Retail Prices Index for periods up to 2011 and the Consumer Price Index thereafter.
Please note that factors and assumed inflation rates are subject to regular review and could change at any time with immediate effect.
What is the earliest
age members can take their benefits?
Under current legislation this is age 55, however, as the Willis Scheme was contracted out of the State Earnings Related Pension Scheme, it is a required by the Inland Revenue to guarantee to pay at least the amount the member would have received had they remained in the State Scheme. This amount is known as the Guaranteed Minimum Pension (GMP), and the reduced pension for early payment can only be taken if the GMP is covered.
Can members defer
receiving their benefits beyond their Normal Retirement Date (NRD)?
Under the rules of the Willis Pension Scheme, a deferred pension automatically becomes payable at the members NRD. A member may postpone drawing their pension with the consent of the Trustees, and whilst the Trustees are happy to consent to a member postponing the drawing of their pension for a short period following their Normal Retirement Date to allow the member time to take appropriate financial advice, they are unlikely to consent to this indefinitely and could withdraw consent and cease to award late retirement increases at any time.
Deferred members with a Normal Retirement Age of 60 may defer receiving their benefits until 65. Active members, who continue to work beyond their Normal Retirement Date, have the option to remain contributing to the Scheme until their employment ceases. Their pension at Normal Retirement Date will be increased for late payment, and they will also accrue an additional 60th/50th for each complete year and month after their Normal Retirement Date they chose to retire.
How are pensions
increased for Late Retirement?
The pension payable at Normal Retirement Date will be increased by a Late Retirement Factor. The actual late retirement factor used is based on the factors in place at your NRD. The current factors are 6.5% for members with a Normal Retirement Age of 60, and 7% for members with a Normal Retirement Age of 65. Both are per annum figures and compound.
For active members who continue in their employment and continue to contribute to the scheme, they will also accrue additional pension.
How is a Senior Member's Post 11 Service, which is only payable from 65 unreduced, treated if they retire at 60?
This portion of the pension would be increased to 65 using inflation to date and assuming 2.4% for future revaluation, then reduced by the appropriate Early Retirement Factor to reflect the fact this this is being paid 5 years early.
How is a Senior Member's Post 11 Service, which is only payable from 65 unreduced, treated if they retire after 60?
This portion of the pension would be calculated at age 60, as above, then the same Late Retirement Factor would be applied as to the rest of the benefits.
Does the Scheme pay HMRC post A-day tax free cash?
Yes
Is tax free cash available by commutation or in addition to pension?
By commutation
What are the Scheme commutation factors?
| Pre 95 Male | Pre 95 Female | Post 95 Male | Post 95 Female |
55 | 36.93 | 40.20 | 33.20 | 35.91 |
60 | 30.97 | 33.89 | 28.25 | 30.73 |
65 | 25.31 | 27.92 | 23.42 | 25.69 |
Are members able to take a tax free cash sum and defer receiving their pension?
No, members are only able to take a tax free cash sum at the same time as a reduced pension.
How does taking a cash sum impact on the pension payable?
The amount of pension exchanged for cash is dependent on the age at retirement. As pension earned at different periods attracts different increase rates (see scheme booklet) the order the pension is commuted is in the following order: Pension earned between 6 April 1997 and 31 December 1995, then pension earned prior to 6 April 1997.
How much would the tax free cash sum be?
If the member had a tax free entitlement greater than 25% on 6 April 2006, they would be eligible for a scheme specific lump sum. This protected tax free cash amount would be calculated on retirement, but may be lost if the pension is transferred away.
If the member did not have a tax free entitlement greater than 25% on 6 April 2006, the tax free lump sum will be broadly equivalent to 25% of the member's Willis benefits.
