Potential restrictions/reductions to your benefits
- If your final year’s salary is used to calculate your benefits and you received an increase of more than 10% plus the standard salary increase, your salary will be restricted if your employer is not prepared to meet the additional cost of the difference in benefits.
- When your application for retirement benefits is received, TP will calculate benefits using both the restricted and unrestricted average salaries.
- TP will notify your employer of the sum required, known as the ‘additional contribution’.
- If your employer pays the additional contribution, you will receive your benefits calculated using the unrestricted average salary.
- It is not possible to anticipate if this provision will apply in advance of a known retirement date.
- If you are approaching retirement and you think it is possible that your average salary might be affected, you should discuss this with your employer.
- This provision will not apply if the salary used in the calculation of your benefits is the average of the best three consecutive years’ salary in the last ten years.
- Transitional arrangements apply to the average salary from 1 April 2007 to 31 March 2009. During this period, salary restrictions may apply during the final three-year period rather than just the final year.
- If more than one employer employs you when you apply for retirement benefits, you must discuss your proposed retirement arrangements with all your employers.
- If you are still paying additional contributions for purchasing additional service, additional pension,or family benefits from your salary when you retire, it may be possible to pay the remaining balance or for you to receive a pension based upon your payments to date.
- If you are intending to use 30% or more of your lump sum to increase your pension benefits, this could result in Her Majesty’s Revenue and Customs (HMRC) subjecting the whole of your lump sum to a tax charge of 40% and a further 15% surcharge if the proportion of your lump sum that you use exceeds 25% of your pension rights in the scheme.
- If you are retiring on or after NPA and the contributions relate to additional family benefits, you will be required to pay the full amount of outstanding contributions.
- Any outstanding amounts are deducted after any actuarial reduction has been applied.
If your benefits are subject to a pension sharing order, you should read the section Pensions on Divorce.