Should I Stay Or Should I Go Now?
— The Clash
The Government have now published their latest consultation document on the options available to officers who had their current pension scheme terminated and were automatically enrolled in The Police Pension Regulations 2015.
They have stated “members will be deemed to have accrued benefits in their legacy schemes, rather than reformed schemes for any … period of service between 1 April 2015 and 31 March 2022“.
If an officer has retired, or is going to retire between these dates, they will have the option to choose whether they wish their pension to be calculated solely in the legacy scheme, or whether they consent to transferring to the 2015 scheme and have their pensions calculated across two schemes.
The decision to remain in the legacy scheme or be retired under the 2015 is a personal and financial decision for the officer as each case is unique, but we’ll provide some areas for consideration before you make that decision.
There are essentially two categories of people that this decision will affect, those who have an Injury pension in addition to their, Ordinary, Ill-health, Deferred, or Short Service pensions, and those who don’t.
IODPA has provided a large number of pension calculations for members and non members over the years, and it is not true, that by switching back to your legacy scheme, you will necessarily be better off. Each scheme has different rules and conditions, and different remuneration depending on when and how you left.
First and foremost, we would recommend that you obtain an official projection from your pay department, so you know exactly what your figures would be if you stayed on the 2015 scheme, or if you reverted back.
If you cannot get official figures very easily, you can get a pretty good idea as to what your figures would be by going to the Emergency Lounge website (www.emergencylounge.com) and using the calculator there. We have been involved in the new version of the calculator which covers all three main schemes. These figures are for illustration purposes only.
Once you have your figures, the thing you have to consider are –
- Transferring back to your legacy scheme won’t necessarily be at no cost to you as the contributory values of each scheme is different, so these contributions will have to be adjusted as well.
- Changing schemes will affect the value of any commutation that you may have already taken. This could well be in your favour, but weigh this up with all the other considerations.
- The 2006 and 2015 schemes for ill-health pensions both have the concept of lower and upper tier, based upon your ability to work in the future. This enhancement can be quite favorable, if you are deemed to be upper tier. Reverting back to the 1987 scheme would see this enhancement removed.
- Changing the value of any of the pensions from the pension schemes will have a knock on effect of changing the value of your injury pension, as the injury pension is (partly) calculated on the value of these pensions.
- It’s worth remembering that the pensions from the pension schemes are taxable, whilst the injury pension is not, so an increase in an ill-health pension will attract more tax, which in turn may reduce your untaxed injury pension.
- Looking into the future, you should also be aware that the injury pension may be reviewed and therefore may go up or down, as is the upper tier of the ill-health pension. Conversely, the 1987 scheme has nothing to review (other then permanency, which all the schemes have anyway).
- The value of switching between schemes is also determined by which scheme you came from and also the length of service that you would have in each scheme.
IODPA cannot give individual advice as to whether you should revert back to your old scheme. Hopefully the above has given you some indication about what you need to understand in relation to all the facts and figures before you in order to make an informed decision.
The most recent Government paper can be found here –Public_Sector_Pensions_Consultation_Response