Pensions

Outline of the scheme

Scheme structure

You belong to what is termed a ‘final salary’ (or defined benefit) occupational pension scheme. The main feature of a scheme of this nature is that you can determine the level of your benefits at retirement by taking into account the length of your service in the scheme and the level of your pensionable salary.

The scheme operates on a ‘balance of cost principle’. This means that your contributions remain constant at the rate of 7.5% of your pensionable pay (less tax relief) whilst your employer is required to pay the balance of contributions necessary to fully meet the costs of running the scheme and paying pension benefits.

Your benefits

The Scheme provides you with several valuable benefits:

• A pension for you when you retire
• A cash lump sum when you retire, which is currently free of tax
• A pension payable to your spouse, civil partner or dependent partner in the event of your death before or after retirement
• Children’s pensions on your death before or after retirement
• A pension for you in certain circumstances should you suffer incapacity
• Increases to all pensions when in payment
• A lump sum if you should die in service before normal retiring date
• A transfer value on leaving service

How the Scheme is run

The scheme is a registered scheme for HM Revenue & Customs purposes. Money for the scheme is paid into a trust fund by both members and the University. This fund is kept quite separate from the assets of the University and is invested by professional investment managers.

Financing the Scheme

At least once every three years, the scheme’s actuary carries out a valuation or “financial health-check” to ensure that the current assets of the scheme are sufficient to pay all the benefits that have been promised to members and to ensure that ongoing contribution levels are adequate. You are required to pay contributions to the scheme although the bulk of the cost of the benefits is met by the University.

Your Trustees

The Trustees of the Scheme are responsible for the administration and investment of the money in the fund. It is the Trustees’ duty to ensure that your interests under the scheme are protected. Details of the Trustees and their advisers are published annually in the Trustees’ annual report, and a copy of the report is available on request from the Pay & Pensions Section of the Finance Office or can be viewed or downloaded from www.gla.ac.uk/services/finance/staff/pay/pensionscheme.htm

The Trustees are elected under arrangements that satisfy the requirements to have at least one third of the trustees nominated by the members of the scheme.

You and the State

In addition to the benefits from the scheme, you will receive a state pension when you reach your state pension age.

You may obtain a forecast from Check your State Pension age - GOV.UK (www.gov.uk) of how much pension you are likely to receive from the state.

Joining and leaving the scheme

Membership

Membership to the Scheme is closed to new joiners although it remains open to build up further benefits for current members.

Scheme membership is voluntary. If you leave or opt out of the scheme, you will not be covered for death in service benefits and you will not accrue any further scheme benefits.

You will be asked for your birth certificate and your marriage or civil partnership certificate together with your spouse’s/civil partner’s birth certificate (original certificates required).

You will be given a death benefits nomination form to complete which indicates to the trustees who you wish to receive the lump sum payable in the event of your death in service. You will also be given a potential dependant nomination form to help the trustees establish if a dependant’s pension can be paid.

If you choose to opt out of the Scheme, you will not be allowed to rejoin the scheme.

Leaving

On leaving the scheme, you will not lose the benefits which you have earned.

If you leave before normal retiring date with two or more years of pensionable service, you can have your benefits preserved in the scheme (see the deferred benefits section)

or

you can ask to have a transfer value paid to another suitable pension arrangement (see the transfer of benefits section).

Deferred benefits

This is made up of two parts: the deferred pension and the deferred cash sum.

The deferred pension is equal to 31/60th of final pensionable salary for each year of pensionable service accrued before 1 August 2005 plus 1/80th of final pensionable salary for each year of pensionable service accrued from 1 August 2005.

The deferred cash sum is equal to 3/80ths of final pensionable salary for each year of pensionable service accrued from 1 August 2005.

The deferred benefits are increased up to retirement at 5% per annum (or the increase in the Retail Prices Index, if lower) subject to statutory obligations.

The deferred pension also incorporates a pension payable to your spouse/civil partner/dependent partner.

The deferred benefits will normally come into payment at your normal retiring date. However, you may take early payment of your deferred benefits at any time after age 55 with the consent of the Trustees and the University. This will change from 6 April 2028 when the minimum pension age will rise to 57.

Your deferred benefits will be reduced if you retire early because they are being paid earlier than expected. However, you can currently take your benefits from age 60 without reduction.

Once the deferred pension comes into payment, it will be increased each year as described on page 11 of this guide.

Transfer of benefits

On leaving employment you may request to transfer the value of the benefits which you have already earned to your new employer’s scheme, a personal pension arrangement or stakeholder pension scheme or other suitable insurance policy.

The trustees will give you a written statement of your transfer value entitlement within three months of your request. This will show your cash equivalent transfer value, which is guaranteed for a further three months from the date on which it has been calculated (the “guarantee date”). The statement will be given to you normally within ten days of the guarantee date.

If you want to transfer the cash equivalent value of your benefits to another scheme or insurance policy, you must apply in writing to the Trustees within three months from the guarantee date shown on the statement of entitlement.

The trustees are not obliged to provide another statement within 12 months of the date of the last request.

Calculation of the cash equivalent value

The cash equivalent value (or transfer value) is the amount which would be sufficient at the date of the calculation to provide your deferred benefits from your normal retiring date, allowing for statutory increases to be applied between the date you leave pensionable service and your normal retiring date.

Further details will be provided if you request a cash equivalent value.

Contributions

…by you

Your contributions are 7.5% of Pensionable Salary. You automatically receive full tax relief on your contributions.

If the contribution rate changes, you will be notified by the Trustees of the Scheme.

...by the University

The University pays the balance of the cost of the benefits. The contributions paid by the University are variable and depend on the results of the scheme actuary’s valuation of the scheme. The University’s contributions are significantly more than the contributions paid by members.

Transfers into the scheme

The Scheme no longer accepts transfers from other pension schemes.

Additional voluntary contributions

The Scheme provides the facility to make additional voluntary contributions (AVCs).

You are allowed to contribute as much as you like towards pension provision to as many pension arrangements as you like. However, if your contributions are more than 100% of your taxable pay, the excess will not benefit from tax relief. There would also be a tax charge if the total contributions paid by you in any year, together with the value of any other benefits earned in that year, result in the value of benefits earned being in excess of the Annual Allowance (set at £60,000 for tax year 2023/24).

You are allowed to take your whole AVC fund as a tax-free cash sum at retirement provided that your total AVC fund is less than the maximum tax-free cash sum that can be provided from the Scheme. Alternatively you may take your AVC fund as a pension or as a combination of pension and tax-free cash. The options available to you will be set out for you shortly before you retire.

If you wish to make additional provision for retirement, you may also contribute to a stakeholder pension plan or a personal pension plan as well as or as an alternative to making AVCs.

Before making any additional pension contributions, whether to an AVC arrangement, stakeholder pension plan or personal pension plan, you should seek advice from an independent financial adviser. The adviser will determine your eligibility to make additional pension contributions and advise on the most appropriate pension arrangement for your personal circumstances.

Further details of the AVC arrangements and your investment options are available from the Pay & Pensions Section of the Finance Office.

Your retirement benefits

Calculate your retirement benefits

You will be entitled to an annual pension from the Scheme when you retire. For pensionable service after 1 August 2005, you will also be entitled to a cash sum when you retire, which is currently tax-free.

This section is designed to help you calculate your retirement benefits from the scheme.

Here is an example for you to follow in making your calculation:

Your pension at normal retiring date based on current pensionable salary is worked out as follows:

1/60^th of pensionable salary x pensionable service completed before 1 August 2005

plus

1/80^th of pensionable salary x potential pensionable service from 1 August 2005

Your tax-free cash lump sum at normal retiring date, based on current pensionable salary, is worked out as follows:

Pensionable salary x pensionable service from 1 August 2005 x 3 ÷ 80

Your actual pension and cash sum on leaving the scheme will be based on your final pensionable salary (see definitions at the back of this guide).

If you are a part-time employee, the example alters slightly, and you should ask for further information.

This calculation does not take account of any additional State pension entitlements or any other entitlements you may have such as transferred-in pensions or AVCs.

You may also exchange part of your pension for an additional cash sum such that your total cash sum is not greater than the maximum allowed by HM Revenue & Customs.

If you decide to take an additional cash sum, your pension will be reduced to reflect the value of the cash sum paid. The amount of the reduction will depend on your age when you retire. If you were in service prior to 6 April 1997, it may be necessary in some cases to restrict the lump sum available to ensure that the remaining pension is not less than the guaranteed minimum pension.

The combined maximum tax-free cash sum that you can take from all your pension schemes will be subject to a limit of 25% of the Lifetime Allowance (see section Other scheme information).

Your tax-free cash sum is a one-off payment when you retire.

Pension increases

All pensions in payment increase in line with the Retail Price Index (RPI) up to a maximum of 10% per annum on the excess over your Guaranteed Minimum Pension.

The Guaranteed Minimum Pension accrued prior to 6 April 1988 is increased in line with the Retail Prices Index by the State.

The Guaranteed Minimum Pension accrued after 6 April 1988 is increased by the Scheme in line with the Retail Prices Index, up to a maximum of 3% per annum, with the State paying any excess up to the full Retail Prices Index.

These increases also apply to the relevant portions of any pension payable to your spouse/civil partner/dependent partner.

Your retirement options

Pension increases

When you retire at your normal retiring date you are entitled to receive a pension from the scheme and a cash lump sum. In addition you may be able to exchange part of your pension to increase your cash sum.

The scheme has other retirement options that are described below.

Early retirement

You may take early retirement and elect to receive a pension with the consent of the University at any time after age 55 with your pension calculated as for normal retirement but with pensionable service taken up to the date of actual retirement. This will change from 6 April 2028 when the minimum early retirement age will rise to 57.

Your benefits will be reduced because they are being paid earlier than expected. However, you can currently take your benefits from age 60 without reduction.

Late retirement

In some circumstances you may be able to defer taking your benefits until after normal retiring date. Payment of your pension may be postponed until the date of your actual retirement when an increased pension will be payable. The latest date at which your benefits can come into payment is your 75th birthday.

Incapacity retirement

If you leave employment due to incapacity, as determined by the University, you may apply for an immediate retirement pension if you have provided satisfactory evidence to the Trustees.

An incapacity pension is calculated like your normal pension is calculated but your pensionable service may be enhanced (subject to a maximum of the pensionable service you could have completed by normal retiring date). Unlike early retirement, incapacity retirement benefits are not reduced because they are being paid earlier than expected.

The table below describes how the enhancement is calculated:

The trustees retain the power, prior to normal retiring date, to reduce, suspend or terminate an incapacity pension in respect of a pensioner who partially or fully regains their earning ability.

Benefits for your family and beneficiaries

Death in service

Lump sum

If you die whilst a contributing member of the scheme your beneficiaries will receive:

A lump sum of four x pensionable salary

plus

A refund of your contributions (plus any AVC fund)

To assist the Trustees in deciding to whom the lump sum benefits should be paid, without binding them in any way, it is important that you complete a death benefits nomination form. You are advised to keep the form up to date and you can request a new form from the Pay & Pensions Section of the Finance Office at any time.

The amount of the benefits payable on your death from the scheme will be limited to the amount the Trustees can insure with an insurance company, and the lump sum benefit will not exceed the Lifetime Allowance. You will be informed if you are affected by this.

Dependants’ pensions

Pension for your spouse/civil partner/dependent partner

Your spouse/civil partner will be entitled to receive a pension, payable monthly for life, equivalent to half the pension you would have received based on your pensionable service to your normal retiring date and your final pensionable salary at date of death.

If you have a dependent partner, you should complete a potential dependant nomination form to help the trustees establish if a dependant’s pension can be paid. The trustees cannot guarantee that a dependant’s pension will be payable as this can only be decided at the time of the member’s death in accordance with HM Revenue & Customs requirements.

Children’s pensions

The pension will continue to be payable after the death of your spouse/dependant until your youngest dependent child attains age 18, or age 23 if in full-time education. If you die but do not leave a spouse or dependent partner, the pension will be paid from the date of your death until your youngest dependent child attains age 18, or age 23 if in full-time education.

Death in retirement

If you die after your scheme pension has commenced, your spouse/civil partner/dependent partner will be entitled to receive benefits as follows.

Spouse’s/civil partner’s pension

Your spouse/civil partner will be entitled to receive an annual pension, payable for life, based on half your pension at retirement date, before any pension was surrendered for a lump sum, together with any pension increases which have applied since that date.

Dependent partner’s pension

Your dependent partner may be entitled to receive an annual pension, payable for life, based on half your pension at retirement date, before any pension was surrendered for a lump sum, together with any pension increases which have applied since that date.

If you have a dependent partner, you should complete a potential dependant nomination form to help the trustees establish if a dependant’s pension can be paid. The trustees cannot guarantee that a dependant’s pension will be payable as this can only be decided at the time of the member’s death in accordance with HM Revenue & Customs rules.

Lump sum

In the event of your death within five years of retirement, a lump sum may be paid to your beneficiaries at the trustees’ discretion.

If you die within five years of retirement, on or after your 75th birthday, no lump sum is payable, instead, your full pension will continue to be paid to your beneficiaries until the five-year period from your retirement date has elapsed.

Other scheme information

Lifetime Allowance

The Lifetime Allowance specifies the maximum amount of pension savings you can have when you retire without incurring extra tax. For the 2023/24 tax year, the Lifetime Allowance will be £1,073,100 and it is expected that the Lifetime Allowance will be abolished from  April 2024.

Annual Allowance

The Annual Allowance specifies the amount by which your pension savings can increase in value each year without incurring extra tax. The Annual Allowance does not apply in the year of retirement.

For the 2023/24 tax year the Annual Allowance will be £60,000.

If the value of all your pension savings increases by more than the Annual Allowance in any tax year, then the excess value over the Annual Allowance will be taxed at 40%.

The Annual Allowance is unlikely to affect you unless you are a very high earner.

If you are unsure whether the Annual Allowance is an issue for you then you can contact the Pay & Pensions Section of the Finance Office.

Absence from work

Most absences from work are for a relatively brief time and do not normally affect your membership of the scheme. If you are absent for a long time your membership will be continued, provided the university consents and continues to pay you.

Divorce or dissolution of a civil partnership

If you get divorced or dissolve your civil partnership, the Trustees reserve the right to pay part of your retirement or death benefits under the scheme to your ex-spouse/civil partner, to comply with any court order or qualifying agreement which requires this.

If you do become involved in divorce or dissolution of a civil partnership, you should contact the Pay & Pensions Section of the Finance Office for further information about the implications for your pension rights.

Maternity leave

During your paid maternity leave of 39 weeks, your membership of the scheme, pensionable service and benefits will continue on the same basis which would have applied had you been working normally. Your contributions, however, will be based on your contractual remuneration or statutory maternity pay.

If, at the end of your paid maternity leave, you go on additional maternity leave and you do not receive pay from the University during any part of additional maternity leave, that period will only count for pensionable service if the university agrees that normal contributions can be paid for the period. The contributions due must be paid within 6 months of returning to work.

Paternity leave

If you qualify for paternity leave, your membership of the Scheme will continue as though you were working normally.

Adoption leave

If you take adoption leave your pension and death benefits will be continued in the same way as for maternity leave. References to maternity leave should be read as adoption leave.

Income tax

Your Scheme pension will generally be subject to income tax. Your cash lump sum at retirement will be tax-free.

Inheritance tax

Your lump sum death in service benefits, which are paid at the Trustees’ discretion, will not normally be subject to inheritance tax.

Giving up your benefits

You are not allowed to assign your benefits under the scheme or to use them as security for a loan.

Alteration or discontinuance

Whilst the university has every intention of keeping the Scheme running, it reserves the right to stop contributing to it. The Trustees with the consent of the University also have the right to alter the provisions of the Scheme. If your benefits or rights are affected, you will be given written notice. If the Scheme is discontinued the Trustees will use the assets of the Scheme as set out in the trust deed and rules.

If the Scheme winds up without enough money to buy all the benefits with an insurer, then, unless the University can afford to pay the difference, you are unlikely to receive the full benefits you were expecting. To help members in this situation, the Government set up the Pension Protection Fund (PPF) which came into effect on 6 April 2005. The PPF pays a legally defined level of benefits to members of eligible UK pension schemes which are wound-up when the scheme does not have enough money to cover the cost of buying this level of benefits for members with an insurer and the employer is insolvent and so cannot provide extra finance.

If the Scheme were to be wound up and go into the PPF, the pension you would receive from the PPF may be less than the full benefit you have earned in the Scheme, depending on your age and when your benefits were earned.

Data protection

All information about you and your entitlements held by the Trustees, or by the Scheme administrators who act on their behalf, is kept secure and is only disclosed in limited circumstances, such as:

• to the university as is necessary for the administration of the Scheme and to advise you of your entitlements under the Scheme
• to insurance companies to arrange particular entitlements
• to actuaries who advise the Trustees and any future potential employers, and
• to government or regulatory organisations, if the Trustees are so obliged.

Please tell the Trustees of any changes in your personal details (especially in your marital status or address) by contacting the Pay & Pensions Section of the Finance Office. By keeping the Trustees informed of changes you will be helping them provide your entitlements quickly when you need them.