The Government has introduced significant changes that give members of Defined Contribution pension arrangements more choice in the future, and there may therefore be changes to your pension savings that you wish to make straight away to set yourself up to take advantage of this freedom. So it’s worth reviewing this information now, even if you are not planning to retire for several years or more. Further information on how this may affect you is available in the guide ‘It’s your money: it’s your choice’. This guide can be accessed in the ‘Further Information’ section of this site and provides you with three steps to help you decide what to do at retirement:
Step 1 – Find out more about your options at retirement
Step 2 – Find out whether any of the options will be available from your scheme, and
Step 3 – Take advice and find out more.
Throughout this site, we talk about defined contribution (DC) schemes (also known as ‘money purchase’ schemes) and defined benefit (DB) schemes (which include ‘final salary’ schemes).
In a DC scheme, you and your employer pay into your pension scheme and the amount your fund is worth at retirement depends on the level of contributions and how your chosen investments have performed.
In a DB scheme, you pay a fixed amount each year but the pension you receive at retirement is worked out as a proportion of your earnings (depending on the number of years you have been in the scheme).
This site looks in detail at the choices for members with DC pension savings. We have, however, also referenced DB benefits in places. If you require further information on the choices open to you as a result of being a DB member, then we recommend you consult an independent financial adviser.
Individuals with DC pension savings could, from age 55, generally take up to 25% of their fund as a tax-free cash sum. Then, there were three options to access the balance:
The income from any of these three options was generally taxed as income. The income tax that you paid depended on your total income in each tax year. The higher your income, the greater the amount of income tax you paid.
These options applied to DC pension savings only.
The Government decided that the limited options for taking DC pension benefits may not suit everyone’s circumstances – hence the changes announced in the 2014 Budget which came into force from April 2015.
The changes give people with DC pension savings significantly more choice at retirement. If you have DB pension savings, the changes also affect you if you have DC additional voluntary contributions (AVCs) in the same pension scheme or have pension savings in another DC scheme, such as a personal or stakeholder pension. If you only have savings in a DB scheme, you will only have these options if you transfer to a DC scheme to take advantage of them. A transfer of DB benefits may not be in your best interests.
Click here to see the previous choices at retirement.
Some further changes were announced in the 2015 Summer Budget which primarily affect higher earners. These changes are due to come into force from April 2016.
This section talks about the changes in general terms. Every pension scheme is different and the way in which the rules are applied in each specific pension scheme may be different. If you have any questions such as how this may affect you, then please refer to the ‘Further Information’ section.
The Scheme comprises a Defined Benefit (DB) Section and a Defined Contribution (DC) Section. The DB Section of the Scheme is closed to both new entrants and to future accrual. The DC Section is open to new entrants.
Members in the DC Section may have pure DC benefits (where the benefits at retirement are determined solely based on the value of their fund at retirement) or DC benefits with a DB underpin (where the benefits provided at retirement are determined based on the value of their fund, but are subject to a specified minimum level), or a combination of both.
At the date of conversion when the Scheme closed the DB benefit to future accrual and converted to DC provision, some members would have become eligible to a DB underpin. If the value of this DB underpin at retirement is more valuable than the benefit that can be secured through the DC fund, then typically the DB underpin takes precedence. It’s important to know if a DB underpin is applicable to you as this could well influence your approach to retirement savings. Further information can be obtained by contacting Capita on 0800 328 4233 or by emailing them direct using the following details; pfizerpensions@capita.co.uk
Now that you have more options at retirement the Trustees are making changes to the investment choices available to you. In particular we have changed LifePath to make it more flexible and more tailored to suit your own choices.
Previously, if members chose LifePath then we would invest your Pension Account on your behalf, moving your money gradually into lower risk funds as you approached retirement (to protect the pension pot you had already built up)
We are in the process of creating three new Lifestyle investment profiles to replace LifePath – these options will be based on the three main options you now have at retirement (Pension Annuity, Income Drawdown or Cash Lump Sum). The default option will be the Pension Annuity route, but you will be able to decide which route suits you best. To read more about the advantages and disadvantages of each option, refer to the guide ‘It’s your money: it’s your choice’ as provided in the ‘Further information’ section.
The Trustee is also making changes to the range of Self-Select funds, for those members who feel comfortable making their own investment decisions, and further details of these will be announced in the near future.
Phase 1 of the changes is already complete and the new funds are in place. For more information on the changes, please contact Capita using the details provided in the ‘Further information’ section of this site.
Please read this announcement carefully as you may wish to change where your pension savings are invested.
Generally you will continue to have the option of transferring either your DB or your DC benefits or both to an alternative pension arrangement outside of the Scheme, provided you have taken independent financial advice. You can request a quotation of the transfer value of your benefits at any time, including when you are approaching retirement. You may wish to consider this option, for example, if you are interested in a flexibility that is not available directly through the Scheme.
Contact Capita for further details.
One of the temporary measures introduced by the Government in 2014 was to change the rules for pension pots that can be taken entirely as cash, and these rules still apply after 5 April 2015. This means that many more people may now fall into the category of having a ‘small’ pension pot (defined as being £10,000 or less). If you think you may be eligible for this option and you are interested in considering it, you should contact Capita for more information.
If you are not a member of your Company pension scheme, consider joining now before it’s too late. The fact that you will have full control over how you take your pension savings when you retire should make a pension a very attractive investment for you.
Please keep in mind that before making any changes to your pension savings, you should speak to a financial adviser to help you make the right decisions. Go to www.unbiased.co.uk for a list of financial advisers in your area.
The purpose of this section is to answer some of the common questions about the Government changes, and to help you understand what they mean for you. The questions are grouped under three difference sections; questions relevant to both DB and DC, questions for just DB and questions for just DC.
If you have any specific questions on what your options are at retirement, then further information can be found by reading the guide ‘It’s your money: it’s your choice’ which can be found in the ‘Further information’ section of this site.
This section talks about the changes in general terms. Every pension scheme is different and the way in which the rules are applied in each specific pension scheme may be different. However, if you are in a DC pension scheme that does not offer the full flexibility as outlined here, you have the right to transfer your pension savings to another pension scheme that does. The 'What next?' section gives you more information on what is happening with your Company pension scheme.
You now have a great deal of choice over how you take your retirement savings from Defined Contribution (DC) pension schemes, as well as certain other arrangements. Having choice is a good thing, but if you make the wrong choices it could cost you a lot of money, possibly leaving you without enough to live on in your retirement.
On average, people retiring at age 65 are currently expected to live for around 22 years, meaning that half are expected to live longer than that. Many people will live into their 90s and a small (but growing) number will live to be over 100.
If you are one of these people, how are you going to ensure that you spend your retirement savings wisely, so that they last for your whole retirement and give you the comfortable, secure lifestyle that you want? Follow these three steps…
Step One
To find out more about all of the options available to you at retirement, please read the guide ‘It’s your money: it’s your choice’ by clicking here.
Step Two
Find out whether your scheme is eligible as the options explained in the guide above may not be applicable in your scheme. You can contact Capita using the details below if you have any questions.
If you are a Wyeth member, you must find out whether you are eligible for a DB underpin. Contact Capita in the first instance to find out more.
Step Three
Take advice and find out more. To decide how to take your benefits, speak to a suitably qualified and FCA-regulated independent financial adviser who will be able to talk you through the different options available to you.
If you have any specific questions in relation to your pension benefits or if you have any questions about your pension scheme more generally, please contact Capita using the details below:
Telephone: 0800 328 4233
Email: pfizerpensions@capita.co.uk
Further information on your pension benefits can be found at the Scheme website www.mypfizerpension.co.uk. If you are a current Pfizer employee you can access this via the Single Sign On facility with hrSource. Once logged in you can access a variety of different functionality such as:
If you need advice based on your personal circumstances, you should speak to an independent financial adviser. A list of local advisers can be found on www.unbiased.co.uk
If you would like to read more detailed information about the April 2015 pension changes, go to https://www.gov.uk/government/topical-events/budget-2014 for the Government publications on the subject or visit the Pension Wise website at www.pensionwise.gov.uk.
For more general information on pension benefits, you can visit www.moneyadviceservice.org.uk or www.pensionsadvisoryservice.org.uk
This site does not constitute legal or financial advice. It is based on Mercer’s current understanding of the proposed changes and further developments are expected over the short term. You should seek financial advice before making any changes to your pension savings.