Police Pension Advice

John1799

(Removed by Forum Team - see post below)

John1799

I am a serving police officer who will have accrued 27 years 172 days actual service on 31/03/22. Throughout this period of service I have been a member of the Police Pension Scheme 1987. When the Government first brought in the new 2015 Pension Scheme, I was informed that, due to my age at that time, I would be given full protection - i.e. I would be allowed to remain in the Police Pension Scheme 1987 until I retired.
The Government has now announced that the Police Pension Scheme 1987 will end on 31/03/22 and ALL police officers, including myself, will be in the 2015 Pension Scheme from that date.
I am over 55 years of age and so I could retire now. Or I could retire on 31/03/22, just prior to the pension changes being brought in. Or I could retire on completion of 30 years of service which would mean I would receive pension benefits from both the Police Pension Scheme 1987 and the 2015 Pension Scheme.
What no-one, including my pension provider, has been able to tell me is how the changes will affect me financially in terms of my pension benefits when I eventually retire?
Any advice?

MX5huggy

I think your over thinking it. You retire when you want it’s just that service after March 2022 will count towards a different pension scheme (but still a good one). Your 1987 scheme won’t be effected by you having a few years in the new scheme.
Please don’t work till you have 60 years service! 

Have you got a forecast for retirement today (or recently) you might find it’s as much as you need say £25k and you currently earn £35k so in fact you are working for £10k (which is taxed NI is paid on, and pension contributions taken from). 

sjp999

John1799 said:

Due to typing error and not knowing how to correct it I have now replaced this with a new post. Thank you. 

I did think it might be a numeric keypad 3/6 typo - thank you for not demanding my home address so you could send your more local colleagues round for a word 😁

In all seriousness, I too think you're sorted/over thinking it - from what little I know of your pension (long suffering, Scottish if it makes a difference, best mate from the age of 8) is doing extremely well on his 30 year service pension. 

MX5huggy

It’s not frozen on the 31/03/22, it will still increase with inflation (whatever the rule is for the police pension, CPI, RPI). It’s just that any additional service won’t add to it. Generally the old final salary scheme benefit those that climb the greasy pole at the end of career compared with the new career average schemes that have better accrual rates but getting promoted at the end of service has a smaller effect, are you likely to be promoted before whatever retirement date? 

John1799

No to promotion. 

John1799

That's good to know that it wouldn't be frozen. 

jamesd

Here's a link to the other post, perhaps a mod would be kind and merge the two discussions? https://forums.moneysavingexpert.com/discussion/6291106/public-sector-pension-query

John1799 I considered replying over there but we've had a fair few officers and questions about the police scheme and the title of this one is more likely to attract informed replies. If you look at the right edge of the darker bar at the top of your post, in which the timestamp appears, there's a set of three horizontal lines that you can use to edit. You can also delete from public view any post of yours except the first in a discussion, which can only be edited, not deleted.

In general the way such transitions happen in the public sector is that accrual of new benefits stops under the old terms and starts under the new terms. The old term benefits continue to get the usual increases for inflation but no more years of service. Assuming this applies in your situation there are no dire consequences for your police whenever you choose to retire. If you wait to thirty years you'd get service until the change date in the old scheme and a tiny bit of service in the new one from that date. For you it's so few days that the difference is going to be miniscule and do you little more harm than the uncertainty. So, relax, as far as the job lets you.

If you've personal or other pension savings and investments or some outside a pension now would be a good time to discuss what to do with them. In particular, it's good for those who are or very soon will be 55 to move money from ISA into personal pensions to get the pension tax relief, while shortly or actually no longer being restricted by the age 55 access condition for pensions.

A decision found that it was age discrimination to allow older employees in public sector schemes to continue under the old terms while younger ones didn't. It appears that for your scheme the decision has been taken, with some grace period for all, to just switch everyone to the new one, likely on cost grounds because cost was the primary reason for the original desire to change.

If you'd like to tell us what your state pension forecast says we can probably help you with that. Because you've been in a contracted out scheme you'll have options no longer available to those who weren't, who are already over the new state pension cap, while by virtue of being contracted out you probably aren't, getting the benefit via the work pension (or lower NI in some schemes) instead but under the new rules also able to get to the new, higher, cap level.

John1799

Thanks for your reply. It is not knowing the figures that is making it difficult to plan ahead.
I haven't even started looking at the State Pension figures yet! 

hyubh

John1799 said:

What no-one, including my pension provider, has been able to tell me is how the changes will affect me financially in terms of my pension benefits when I eventually retire?

Well the short answer is, they can't, because the precise detail hasn't been decided yet. However in general terms, were you to continue past March 2022, you would keep a final salary link for your 1987 scheme service to date but no longer accrue additional service in the 1987 scheme after that point. Since you have suggested you are unlikely to get a late career promotion the final salary link is largely moot, although any sort of above inflation increase in your pay will inflate the value of all your 1987 scheme service (that's how a final salary scheme works).

That said, the big kink for you is, presumably (but see my first point!) the loss of double accrual for the final bit. So rather than 1/30 final salary, it would be 1/55.3 your pay for each year from April 2022. Also, drawing your CARE pension before 60 would give rise to an 'actuarial reduction' on it (but not your 1987 scheme pension, which keeps its own NPA or 'normal pension age').

Put another way, the post-March 2022 pension won't be quite as good as continuing 1987 scheme membership, however it's still very good. Also, personally I wouldn't see March 2022 as a crunch point - i.e. it would make sense to quit then if you feel you've got enough pension to date and fancy retiring, not because you would be moving to the 2015 scheme if you stayed in the force.

John1799

Thank you for your advice.
Your advice, and that of others, is reassuringly backing up what I thought myself.
Purely on a personal level, it is just unfortunate that the changes are going to be implemented when I am contemplating retirement and the whole pension transition process is probably going to be a long drawn out affair.