CIS Employees' Pension Scheme (Former Scheme) Your Questions Answered 1) How much will it cost me? Under PACE, all Members will pay a contribution of 6% of their pensionable earnings. 2) What part of my earnings will be pensionable? You will pay contributions and build up benefits on your basic pay, and any overtime, commissions and shift allowances that you earn. 3) How much will my Employer pay? Your Employer will pay the balance of cost of providing all Members benefits, after allowing for Members contributions, so the rate at which your Employer pays into PACE may change from time to time. However, your Employer will pay around 16% of pensionable earnings into PACE for at least the next three years when an actuarial review will be carried out. This is more than twice what Members will pay. 4) Will I have to apply to join PACE? If you are accruing benefits in the Former Scheme on 5 April 2006, you will become a Member of PACE from 6 April 2006 and your accrued pension (Former Scheme pension) will be transferred automatically. You will not need to take any action. If you are currently paying your contributions through salary sacrifice, you may continue to do so. You will not have to complete a new salary sacrifice agreement. If you are currently working in Insurance Sales and are not on four weekly pay, your HR team will write to you in Quarter 1 2006 with details of the salary sacrifice option. 5) What happens if I do not want to be a Member of PACE? If you are an existing Member of the Former Scheme and you decide you do not want to join PACE automatically on 6 April 2006, you will need to complete an opting out form available from your HR team. You will then be treated as an early leaver under the terms of the Former Scheme. In order for this to be effective for 6 April 2006, this form must be returned to your HR team before 28 February 2006. If you do not return your opting out form before 28 February, you will be entered into PACE automatically, and you will need to follow the opt out process as set out on page 8 of the PACE Members Guide or in the Joining section of this website.
You should note that if you apply to join PACE in future, after previously opting out, special terms may apply and medical evidence may be required. If you are not a Member of PACE, you will not be covered for any life assurance benefits under the scheme. 6) How will my pension be worked out under the old and the new schemes? If you are accruing benefits in the Former Scheme on 5 April 2006, your benefits will be calculated on your pensionable service up to 5 April 2006 but on your pensionable earnings at the date you leave or retire (calculation date). These will be added to the benefits you build up in PACE between 6 April 2006 and the calculation date. 7) What is the Normal Pension Age? The Normal Pension Age for PACE will still be your 65th birthday. 8) Can I still retire early and if I do, what reduction will be applied to my pension? You can still retire early from age 50 but your pension will be reduced to take account of the fact that it is being paid early. From 6 April 2010, the new tax rules mean that the earliest age at which you can retire will be 55. As a Member of the Former Scheme on 5 April 2006, you will retain your right to be able to retire from age 50 despite the change in the tax rules that will take effect from 2010. Generally, people are living longer which means that pensions are being paid for longer periods. This increases the costs of pensions and has had to be taken into account in the way in which pensions are provided in PACE. Early retirement adjustments are based on your age at retirement. Details of the adjustments that apply at each age under the Former Scheme and PACE can be obtained from the Group Pensions team. Under PACE, early retirement adjustments will be applied in two parts: A. Any Former Scheme pension will be worked out using the early retirement factors that applied in the Former Scheme at 5 April 2006. B. Benefits built up in PACE from 6 April 2006 will be worked out using cost neutral factors based on the actuary s advice.
Example: If a Member retires early at age: Former Scheme early retirement adjustment (applies to pension accrued up to 5 April 2006). 55 19.5% 45% 60 NIL 25% So, for a Member retiring at 60: Total early retirement pension payable: ( 5,000) + Accrued Former Scheme pension: 5,000 p.a. No reduction applied PACE early retirement adjustment (applies to pension accrued from 6 April 2006). PACE pension 1,500 p.a. x 25% = 375 reduction applied ( 1,500-375) = 6,125 p.a. Please note: The examples shown above relate to Members who retire from an Employer and take their pension immediately. Different factors may be applied to deferred pensions when they become payable. If you require any further information please contact the Group Pensions team. 9) I keep hearing in the news that state pension ages are increasing, how will this affect me? Any changes to the state pension age are currently only speculative. If the state pension age changes in future, the Group will review how this might affect its pension arrangements and you will be advised of any changes that may be made. 10) Will I still be able to take a tax-free lump sum when my pension starts? When you retire, you may choose to exchange part of your pension for a tax-free lump sum. The tax rules are changing on 6 April 2006 and the maximum amount that you will be able to take will be 25% of the value of your pension (including any AVCs) under the new tax rules. This may mean that you will be able to take a bigger lump sum than before, particularly if you have been paying AVCs. Please see page 23 of the PACE Members Guide and the tax rules section on this website for further information. 11) How will my pension be increased when it is being paid? When your pension is paid, the Former Scheme part will be increased on the terms that applied under the Former Scheme. The part of your pension that you will have accrued as a Member of PACE (i.e. from 6 April 2006) will be increased by the annual rise in the Retail Prices Index as at 31 December, up to a maximum of 2.5%. The Group and the Trustees may award discretionary increases from time to time.
12) How are ill-health benefits affected? To qualify for an ill-health pension you must have been a member of PACE for at least five years. Completed continuous service in the Former Scheme at 5 April 2006 will count towards this qualification period. However, for Members of the Former Scheme who were accruing benefits on 5 April 2006, the five-year qualifying membership condition will not apply to the total ill-health pension. Any ill-health pension from PACE will include your Former Scheme pension which will be based on your pensionable earnings at the date you retire. 13) How will my benefits be affected if I die in service? The lump sum life assurance benefit from PACE is more than that provided by the Former Scheme. Although PACE provides a good level of life assurance and pension benefits for qualifying dependants, you are recommended to review your own insurance arrangements to ensure sufficient protection for your family in the event of critical illness or death. You may want to seek independent financial advice to ensure that you and your family have adequate cover. A change has been made to the level of a Qualifying Partner s pension. Please refer to page 20 of the PACE Members Guide and the Benefits ection on this website for more information. The pension that will be payable to a Qualifying Partner will not be less than the benefit that would have been paid under the Former Scheme based on your pensionable service to 5 April 2006 and your pensionable earnings at the date of your death. If you die in service leaving a Qualifying Child, a child s pension will be payable in respect of the Former Scheme part of your pension worked out on your pensionable earnings at the date of your death. However, a child s pension will not be built up in PACE. 14) I have already completed a form to say who should receive my benefits in the event of my death in service. Will I be required to complete a new one for PACE? If you have already completed a nomination form as a Member of the Former Scheme, this will transfer across to PACE. However, you should keep your nomination form up to date as your circumstances change. 15) I already have a deferred pension in the Former Scheme, will this be affected? No, any deferred benefits in the Former Scheme will be transferred into PACE. They will not change and they will be paid on the same basis as under the Former Scheme. 16) I am paying AVCs now, do I have to do anything about these? You can continue to pay into your existing AVC plan and do not need to take any immediate action as your current level of contributions will continue automatically. However, it is recommended that you review the amount of AVCs that you pay from time to time as part of your pension planning. If you would like more information about AVCs, please ask the Group Pensions team for an AVC factsheet.
Please Note: Under financial services legislation, the Group Pensions team is not allowed to provide financial advice. However, colleagues are available at Millgate Insurance Brokers Limited and Cooperative Bank Financial Advisers Limited to provide independent financial advice. This information is not a legal promise to Members. If there is any conflict between this information and the PACE Rules, the Rules (as amended from time to time) will be overriding. If you have any questions, or wish to request a copy of the Rules, please contact the Group Pensions team. The information provided assumes that the Trustees of the Co-operative Group (CWS) Limited Pension Fund, CIS Employees Pension Scheme and The Co-operative Bank Pension Scheme all agree to a transfer to PACE. Members will be advised if a transfer does not take place and of any consequential changes that may be made to their benefits.