The New Police Pension Scheme
The New Police Pension Scheme came into force in April 2006. All new joiners, reentrants and transferees from other police bodies like British Transport Police/Ministry of Defence Police joining after this date will have no option but to join this scheme (note: transferees who move between Home Department forces under old Reg A16 will remain in the current scheme, also people on an approved career breaks who return to duty).
Basic principles of the NPPS
- 35 years scheme — officers will have to serve 35 years to be entitled to a full pension.
- The maximum pension is 50% of final salary
- The tax free lump sum is four times the pension
- Minimum age at which the pension can be taken is age 55.
- The deferred pension is payable at 65
- The pension grows by single accrual – 1/70th of the final salary for each year of service (with a maximum of 35/7Oths after 35 years).
- Pension contributions are 9 ½% of pensionable pay (basic salary, London Weighting, CRTP and temporary promotion).
- There are two tier ill-health benefits
- There are life long adult survivor benefits (not withdrawn on remarriage)
- There are children's pensions
- There is no AVC scheme, however can buy added years (and also pay into a private pension)
- Full pay/pension for the first thirteen weeks after death is not payable
- Death in Service Grant is three times salary
Pensionable Pay
Contributions are 9 ½% of pensionable pay, however, if an officer is permanently disabled on joining, he/she can be excluded from the ill health benefits but contributions reduced to 6%.
Final pensionable pay is best in the last ten years (actually best of the last three years — or the average salary of any three consecutive years in the preceding seven years if better)
Can opt out and rejoin and then opt out again, but can only rejoin again after a break in service.
Pensionable Service
Pensionable service is the service during which pension contributions are made, with part time service on a pro-rata basis (e.g. five years service at three days a week buys three years pension).
Bach complete year of service 'buys' 1/70 of final pensionable pay as the pension (and parts of the year are defined as the number of days out of 365 and expressed as a decimal) and each complete year of service 'buys' 4/70 of final pensionable pay as lump sum.
There is no commutation; however an officer can opt to give up part of the lump sum for an increased pension.
Therefore at age 55, if an officer has 35 or more years pensionable service, then he/she is entitled to 3 5/70 (i.e. half) his final pensionable pay and 4 times the pension as a lump sum.
Two examples,
- if the final pensionable salary is £35000, then at age 55 and 35 years service, the pension is £17500 pa (1/70 x service (35) x 35000) and the lump sum is £70000 (4/70 x 35 x 35000) and
- if at age 55 the service is only 30 years, then the pension is £15000 pa (1/70 x 30 x 35000) and lump sum £60000 (4/70 x 30 x 35000).
Pension Age
The Pensions Age is the age at which someone CAN retire with a pension - i.e. age 55. The Retirement Age is the age at which someone MUST retire and since the introduction of Age Legislation in October 2006 is now 60 years of age for Constables and Sergeants.
Should officers achieve 35 years pensionable service before the age of 55, they will not be allowed to draw the pension before the age of 55 and should they leave/come out of the pension scheme before age 55, the pension will then not be payable until age 65.
Deferred Pension
Deferred pensions are paid at age 65 and are applicable to officers who have a) opted out, b) left the service before age 55, c) stopped paying pension contributions before the age of 55.
THIS INCLUDES OFFICERS WHO HAVE ACHIEVED 35 YEARS PENSIONABLE SERVICE.
An officer can opt to have this paid before age 65, but will be subject to an actuarial reduction.
The deferred payment can be payable immediately if permanently disabled for regular employment.
In dismissal or being required to resign cases, the Police Authority has the discretion whether to pay or not.
Ill-Health
The procedures are unchanged. An officer has to be permanently disabled from 'performing the ordinary duties of a police officer' and the decision is at the discretion of the Police Authority (taking the DDA/manning etc into account).
There are now two levels of ill-health pension - Standard and Enhanced
Standard is if the officer is disabled from being a police officer, but can still work outside the police and Enhanced is if the officer is incapable of other regular employment (less than 30 hpw based on full time — subject to the all work test).
The Standard Ill-Health pension is payable immediately at the rate of the actual pensionable service and is index linked.
The Enhanced Ill-Health pension is payable immediately and is index linked but has enhanced pensionable service -
i) if officer has less than five years service, then four times actual service unless 50% prospective service to 55 would be lower
ii) if officer has five or more years service then pensionable service is increased to 50% of prospective service to 55.
Depending on circumstances there can be movement between standard and enhanced pensions, but an officer cannot move up to enhanced after five years in retirement unless it is a progressive condition.
The Police Authority can consider whether disablement has ceased and if so can invite officer to re-join up to the age of 55.
There is the assumption that the officer will continue to undertake normal medical treatment after retirement. If officer does not undertake normal medical treatment and it is decided that his disablement would have ceased with this treatment and also that his actions were willful/negligent then the officer is first warned and if situation continues the pension could be lost.
Injury pension regulations have now been removed from the Police Pension Scheme and are not included in the NPPS as the result of the 2004 Finance Act and are currently being re-written (and altered?) and will appear on completion in the Injury Benefit Regulations.
Adult Survivor Benefits
Adult Survivor Benefits are payable to a) surviving spouses b) surviving civil partners c) Other co-habiting partners, subject to fulfilling conditions.
Conditions for Cohabitees:
- officer and partner must complete the form and send to the Police Authority (suggest that this is done as soon as couple start to cohabit whether or not the relationship is expected to be long term)
- officer and partner must each be free to marry or have civil partnership
- must be cohabiting as partners in exclusive, committed and long-term relationship
- financial dependence or interdependence
The Police Authority will generally expect at least two years cohabiting before awarding the pension. The cohabiting form can be completed at any point in the relationship and after death the partner completes a claim form.
The benefits are life long and do not stop on remarriage/cohabiting, however, there are two conditions affecting the level of the benefit:
- if the age difference is more than 12 years the survivor pension is reduced by 2 ½% per year up to 50%
- if death is within six months of marriage the Police Authority has the discretion not to pay the pension.
Calculation of benefit - where the death is in service, it is 50% of the enhanced ill health pension. If the officer had retired then it is half of the pension in payment or half the deferred pension if not yet in payment.
The thirteen weeks enhanced pension is NOT paid.
The death grant is 3 times salary and a beneficiary may be nominated.
Children's Benefits
If one or two children, each gets 50% of the survivor pension, however, three or more children the adult survivor pension divided by the number of children.
Miscellaneous Items
There is no linked AVC scheme — but still available as free standing ones arranged by any pension company.
There is the facility to 'buy added years' (also exists in the PPS), if full pension is not achievable by age 55, but very expensive.
There is also the facility to allocate part of the officer's pension in respect of a dependant can only pay 9 ½% (or 6%) into the NPPS, but can pay into other pension products concurrently (up to a limit of £215,000 pa!).
Important information
Important information about pensions administrators NPPS, like the current scheme, will be administered locally in each force. Your pensions administrator – acting on behalf of the police authority – can provide factual information to help you decide whether you should remain with the current scheme, or transfer to NPPS during the transfer window.
What they can’t do, however, is advise you on which choices to make. If you are considering the transfer option, you might first want to seek independent financial advice. Read more in the Police Reform News March 2006
New Police Pensions Benefits
See the benefits of The New Police Pension Scheme