Calculating your Benefits
If you are an active member at Normal Pension Age (60) you can draw your pension at any time on or after your 60th birthday. Your active member's account and any added pension account would be closed and a retirement account set up. There would be no reduction for early retirement but there may be an age addition if you had continued in service after age 60.
However, if at least age 55, you can elect to draw your pension before age 60, by giving written notice to the Fire & Rescue Service (FRS). In these circumstances, however, the pension would be subject to an early retirement reduction based on factors provided by the Scheme Actuary.
There is also an option for 'partial retirement' once you have reached age 55, if you wish to draw your pension but continue your employment as a firefighter without break and accrue additional pension.
Your active pension account (and any added pension purchased) would be put into payment (subject to an early payment reduction if you had not reached age 60) and a new active pension account set up for your new period of membership. This second pension will become payable, on similar terms to your first pension, when you are ready to draw it.
You will also have the option to exchange part of the pension to provide for a lump sum (otherwise known as Commutation).
The earned pension credited to your pension account is based on your Pensionable Earnings (or assumed pensionable pay, if applicable).
The following items are treated as pensionable pay:
- pay received for the performance of the duties of your role, except for any allowances or emoluments paid on a temporary basis;
- your permanent emoluments (including, in the case of a retained firefighter, any retaining allowance);
- the amount foregone if you have agreed to surrender the right to receive part of your pensionable pay in exchange for the employer providing a non-cash benefit (this is sometimes referred to as "salary sacrifice");
- the amount paid for continued professional development if the authority has determined that this should be pensionable.
Sometimes a firefighter's pay may be reduced or cease for a period, which could have an effect on the assessment of benefits. In such cases, assumed pensionable pay will be applied in order to ensure that a member's benefits will not be affected.
These circumstances include sick leave, injury leave, child-related leave and unpaid leave. In some circumstances e.g. sick leave with reduced pay, assumed pensionable pay will be applied automatically, whereas in other cases e.g. sick leave with no pay, the application of assumed pensionable pay would depend upon a member re-paying pension contributions for the relevant period.
Any payments made by an employer to a member who is on reserve forces service leave would not count as pensionable.
When you join FPS 2015, a pension account will be opened for you and it will remain open for as long as you are a contributing member of the Scheme.
If you are an active member in more than one employment at the same time, you will have an active member's account for each employment. Your pension will build up year on year as follows
1/61.4 X pensionable pay = earned pension credit
Let's suppose your pensionable pay plus any assumed pensionable pay during your first scheme year is £29,850. Your earned pension for that year would be:
1/61.4 x £29,850.00 = £486.16
To this would be applied an 'index adjustment'. This would be a percentage increase or decrease specified in an Order issued by HM Treasury, reflecting any national change in average weekly earnings. It is applied to ensure that the pension which you hold in your account each year maintains its value on a year by year basis.
If during the scheme year you have been on leave, on reduced contractual pay or no pay due to sickness or injury, or have been on relevant paid child related leave or reserve forces leave then for that period your pension is based on your assumed pensionable pay.
Your active member's account would continue to build in this way for so long as you remain an active member of the Scheme. Also, if you were to remain an active member beyond the Scheme's normal pension age (60), an 'age addition' i.e. an additional amount of pension, calculated in accordance with the guidance of the Scheme actuary, would be added.
If a transfer value payment is received from another pension scheme, your pension account would be credited with an amount representing that transfer value, in the scheme year in which it is received.
Exchanging your Pension
Upon retirement, if you wish, you can give up part of your annual pension to receive a one-off lump sum payment. This is known as Commutation.
There are limits, however, on the amount which can be commuted. The commuted portion of pension must not be more than 25%, nor be such that the resultant lump sum exceeds certain tax limits, resulting in a scheme chargeable payment. By staying within these limits, the lump sum by commutation will be tax-free. At the time of retirement, you will be advised of your current limits.
If you wish to use this option to provide a lump sum, you must give written notice before the first payment of pension is made, setting out the amount of your pension that you wish to commute. You can commute as little or as much as you like, provided you do not exceed the limits. For every £1 of annual pension you choose to commute, you will £12 as a lump sum.
Suppose you are entitled to a retirement pension of £16,000 a year and you choose to commute the maximum portion of 25% i.e. £4,000. Assuming this is permitted within tax limits, your total benefits would be:
Annual Pension: £16,000 - £4,000 = £12,000
Lump sum: £4,000.00 x 12 = £48,000
Although a retirement, deferred or lower-tier ill-health pension can be commuted, you CANNOT commute a a higher tier ill-health pension.