Frequently asked questions
Choice of package.
What happens if I prefer Package B, but the final decision goes in favour of Package A?
- Whichever package is finally chosen, that package will apply to every member of OSPS. So, if you prefer Package B, but Package A is chosen, Package A will apply to you. The same is true if package B is chosen – everyone, including those who preferred Package A, will go forward with Package B from 1 January 2013. Your other option, of course, is to leave the scheme, but you would want to give that careful consideration before making your decision.
Choosing a cost plan.
How often will I be able to move between cost plan options? Do the same timings apply to both Package A and Package B?
- In both packages you have a choice of cost plans. You will be able to choose once a year which cost plan you wish to have for the following year: in Package A you will be able to move between Lower, Standard and Higher, and in Package B between Standard and Higher. Whichever plan you chose, will be the one you are on for the following year.
- In the autumn of 2012, once we know whether OSPS will implement Package A or Package B, we will write to you with the information you need and ask you to decide which cost plan you wish to be on from 1 January2013.
- We will write to you again in around March 2013 to ask you to confirm or to change your choice. We will be doing this partly to allow you to make an early change in your initial choice if you want and partly so that we can move to an annual cycle in which March is when you make your annual choice of cost plan. This is a good fit with the existing pension and tax year cycle.
- When we first ask you to choose a cost plan, the default will be the Standard cost plan in each package. This means that if you do not tell us your choice, you will be placed on the Standard cost plan. Later, if you do not tell us that you want to change at the annual review, you will be kept on the same cost plan that you had been on for the previous year.
Calculating my pension.
What happens if I have been in OSPS since before 1 January 2013 and then stay as a member under the new rules? I understand that the changes do not affect my pension before 31 December 2012, but what does that mean in practice? Do I get two pensions? How is it calculated?
- If you are an active OSPS member before 2013 and then take your pension once the changes have been implemented, you will receive one pension, and one pension statement, but made up of two elements – one based on Final Salary, one based on CARE.
- As an illustration, let us assume that, you have been an active member of OSPS for some years and that on 31 December 2012 you have 20 years of service and are on a salary of £20,000. Everything up to this point will be treated as Final Salary. You work for four more years after 1 January 2013, remaining in OSPS, before taking your pension, leaving work on a salary of £23,000. Your benefits in this four year period will be built under the new CARE rules.
- The calculation of your pension, and the lump sum, goes as follows:
- You calculate the Final Salary element: on 31 December 2012 you had ‘banked’ 20 years of Final Salary service and an accrual rate of 1/80. You multiply these by your final salary – this is £23,000. (You were promised a final salary pension for this part of your service, so the salary used is your final one, however many years after 1 January 2013 this comes). 20 x 1/80 x 23,000 = £5,750.00 p.a.
- You then calculate the CARE element for the four years you have worked after 1 January 2013: let us assume that each year in this period your salary has increased by £1,000 to reach the final salary of £23,000. In each of those years a portion of your salary, equivalent to the accrual rate, is earned towards your pension. Assuming that OSPS is in Package A and you have chosen the Higher cost plan your accrual rate will be 1/80. Each year’s benefits are then adjusted for inflation (assume RPI is 3% each year).
- So, in the four years under CARE the benefits you earn will be
20,000 x 1/80 = £250 + 3 years @3% = £273.18
£21,000 x 1/80 = £262.50 + 2 years @ 3% = £278.49
£22,000 x 1/80 = £275 + 1 year at 3% = £283.25
£23,000 x 1/80 = £287.50 + no adjustment = £287.50
To calculate the pension you add these years of benefits together.
The total Care element for these four years after 1 January 2013 is £1,122.42 p.a. Add the two elements together and you come to a total pension of £5,750.00 + £1,122.42 = £6,872.42 p.a. You will also receive a lump sum of £20,627.26 (three times your pension).
- Please note that all figures are for illustration only.
Re-grading before 31 December 2012.
Last year I was re-graded from grade 4 to 5. How would a move to CARE affect me? Would I be better off with a Final Salary scheme?
- Any pension benefits you have built up before the changes come into effect on 1 January 2013 will not be affected. The pension benefits you have built up before that date will be calculated and paid to you on a Final Salary basis when you retire. Your re-grading will be taken fully into account.
When the proposed changes are implemented, will I still be able to pay AVCs?
- You will be able to continue paying AVCs. The benefits bought under existing contracts will be honoured. However, the proposed changes to the scheme are likely to require a review of the current facility whereby AVCs secure additional pensionable service, and it is likely that this facility will be closed to new contracts. A new facility in which AVCs will still be able to secure additional pension benefits, but in a different form, is likely to be introduced. The current facility whereby AVCs are invested in an insurance contract is likely to continue. However, both facilities are under review and further details will be communicated in due course.
Increase in State Pension Age.
What happens when the State Pension Age goes up to 66? What difference will that make?
- Under the proposed changes in OSPS, the scheme’s Normal Pension Age will be linked to the State Pension Age (SPA). At the moment this is the 65th birthday. From April 2018, the SPA, and the Scheme’s Normal Pension Age, will progressively increase so that it is the 66th birthday by March 2020.
- If you take your pension early (before the Normal Pension Age), it is usually reduced (by about 5% a year) to allow for early payment (and therefore payment on average over a longer period of time). So at the moment there may be an early retirement reduction if you take your pension before 65.
- Whatever your Normal Pension Age, you will face a reduction in benefits if you take your pension before that age.
- But remember that, if you have been an active OSPS member since before 1 August 2004, you have the right to ask to take your pension from the age of 60 without any reduction for early payment. This rule is not being changed.
Taking pension early.
When I started work in Oxford in 2008 I transferred into OSPS the benefits I had built up in another pension scheme of which I had been a member since 2000. Does this mean that I have the right to ask to take my pension from the age of 60 without reduction for early payment?
- No. The important date is when you joined OSPS. Although your previous benefits are included in your OSPS benefits, you did not actually join OSPS until 2008. You therefore joined OSPS after August 2004 and are not one of those who may request retirement at 60 on unreduced benefits. The benefits which you transferred in from your previous pension scheme will continue to count as benefits in OSPS on the same terms as they do now.
How will the proposed changes affect the pension my partner will get if I die after taking my pension?
- Under current rules, if you are receiving an OSPS pension when you die, your dependant (usually your spouse or partner) receives a pension equivalent to 2/3rd of the pension you were receiving.
- Under Package A in the proposed changes, the dependant’s pension would be reduced to ½. But please note this will only apply to any pension which you earned after 1 January 2013.
- The element of your pension that is based on service before 31 December 2012 will be calculated on a Final Salary basis; even after 1 January 2013 your dependant would continue to receive 2/3rds of that element. The reduction to 50% will only be applied to the part of your pension that is earned after 1 January 2013.
- To illustrate: if your pension when you die is £4000 p.a., of which £3,000 p.a. was earned under Final Salary and £1,000 p.a. under CARE, your dependant will receive a pension of £3,000 x 2/3 = £2,000 p.a. plus £1,000 x 0.5 - £500 p.a., making a total of £2,500 p.a.. If the entire pension had been under Final Salary the dependant’s pension would be £2,666 p.a..If all of it had been earned after 1 January 2013, and therefore under Package A the dependant’s pension would be £2,000 p.a..
- So if you take your pension after many years in Final Salary OSPS and only a short period under CARE, there will not be such a significant reduction in the dependant’s pension.
- Under Package B, there is no change proposed in the dependant’s pension, which would continue to be calculated as 2/3rd of the pension you were receiving at your death.
Death in service lump sum.
How will the proposed changes affect the lump sum payment to my dependant if I die before taking my pension?
- Under current rules, if you are an active member of OSPS who dies before taking pension, your dependant will receive a death in service lump sum equivalent to four times the salary you were receiving when you died.
- Under the proposed changes, in Package A this would be reduced to three times. In other words if you die in service at any time on or after 1 January 2013 your dependant would receive a lump sum equivalent to three times your salary.
- Package B does not propose to change this benefit - the death in service lump sum would remain four times salary.
Promotion to grade 6.
I am currently in grade 5. What happens if I am re-graded to grade 6 after the proposed changes to OSPS are implemented?
- If you are re-graded to 6 after 1 January 2013, you would have to stop membership of OSPS and you will have the option to join USS.
- You would have a choice on what to do with the benefits you have built up in OSPS:
- You could transfer your OSPS pension into the USS CARE scheme and later draw your benefits from USS;
- or you could preserve your OSPS benefits (which you could then draw when you retire) and separately join USS CARE
- or you could preserve your OSPS benefits (which you could then draw when you retire) and not join USS.
- Which option was best for you would be something you would have to decide, after taking information and advice, in the light of your specific circumstances at the time.
Can the Pensions Office provide me with a personal quotation to show me how the various packages and options in the OSPS consultation document will affect me personally?
- Give that this consultation involves many thousands, the Pensions Office cannot hope to resource personalised quotations for everyone. They are prioritising their efforts on those members of OSPS who are due to reach the normal pension age (65) before 31 July 2013 and those who are seriously considering early retirement in the first half of 2013. These members may ask for quotations in the usual way.
- Other members whose retirement is not so imminent can either be guided by the illustrations in the consultation booklet, or make use of the ‘change modeller’ on the OSPS consultation website. These will give a general indication of the effect of the changes on your pension, but are not intended to be, and must not be relied on as, an accurate pension quotation. Please read carefully the notes and cautions that accompany the modeller.
- If you do not have access to the University website, please ask someone who does - such as your departmental or college OSPS contact point – to run the model for you.
OSPS member at grade 6.
I am currently a grade 6 but remained in OSPS following the assimilation exercise in 2006. Can I join USS now? What happens if I am re-graded or promoted into a higher grade after 1 January 2013?
- You may choose to join USS, but you will join the CARE section of USS.
- However, if, after 1 January 2013,you take on a new post at grade 6, or are re-graded or promoted into a higher grade, you will have to leave OSPS and you will have the option of joining the CARE section of USS scheme. If you leave OSPS for this reason, you will be able to leave your benefits in OSPS, provided you qualify for deferred benefits, or transfer them into the relevant section of USS.
Reaching pension age in July 2012.
I reach my normal pension age on 31 July 2012, and continue at work. What happens to my pension?
- If you reach your normal pension age on 31 July 2012 and continue to work, you have a choice:
- You could stop making contributions to the scheme on 31 July 2012. If you do that your pension benefits will be preserved until you do eventually retire. In this case your pension will be increased by a late retirement factor.
- If you decide to stop your contributions on 31 July 2012, you will have the opportunity to restart them on 1 January 2013 to build up additional benefits in the CARE scheme. Your benefits as at 31 July 2012 will not be recalculated except for the application of the late retirement factor.
- You could continue to pay into OSPS and therefore continue to build up your benefits in the usual way.
- There is no limit to how many years you can continue to contribute. Until 31 December 2012 you will be paying into the Final Salary scheme. From 1 January 2013 your contributions will be into the CARE scheme.
- If you eventually retire after 1 January 2013, your benefits will be calculated in two parts: Benefits you have built up to 31 December 2012 will be calculated and based on your final pensionable salary as at 31 December 2012 and then increased by a late retirement factor. Further benefits built up after 1 January 2013 will be calculated on the CARE basis.
- You will have a further opportunity to stop your contributions on 31 December 2012. If you do that your pension benefits will be preserved until you do eventually retire. In this case your pension will be increased by a late retirement factor.
65th birthday before January 2013.
I reach my 65th birthday after 31 July 2012 but before 1 January 2013, and continue at work. What happens to my pension?
- If you reach your 65th birthday after 31 July 2012 but before 1 January 2013, and you decide to continue at work, you have a choice:
- You could stop making contributions to the scheme on 31 December 2012. If you do that your pension benefits will be calculated as at 31 December 2012 and preserved until you do eventually retire. In this case, your pension will be increased by a late retirement factor.
- You can continue to contribute to the Scheme.
- There is no limit to how many years you can continue to contribute. From1 January 2013 your contributions will be into the CARE scheme.
- When you eventually retire after 1 January 2013, your benefits will be calculated in two parts: Benefits you have built up to 31 December 2012 will be calculated and based on your final pensionable salary as at 31 December 2012 and then increased by a late retirement factor. Further benefits built up after 1 January 2013 will be calculated on the CARE basis.
How long will the employers continue to pay 21.5% into the scheme? What will happen if the deficit gets better or worse?
- The employers have committed to paying 21.5% for the foreseeable future. There is no fixed time limit. The employers will only consider decreasing their contributions when it is healthy to do so.
- The proposed changes to the scheme have been designed on the basis of prudent and sensible assumptions. But none of us can predict the future and it may be that significant changes, for better or for worse, outside the scheme’s control will create the need or opportunities for further review of the scheme. As and when that happens, there will be full consultation with members about any proposals for change.
How does flexible retirement work?
- Details of how flexible retirement works, and of the University’s policy on flexible retirement, are available at: http://www.admin.ox.ac.uk/personnel/end/retirement/flexretire/
- If you are not a University employee and work for a college or another OSPS employer, you should check locally what your employer’s policy on flexible retirement is.
Upper age limit.
In the past I was excluded from OSPS because I was over the maximum joining age when I started my post. Will I able to join OSPS with effect from 1 January 2013 and will you be informing non-members in my position about this?
- Yes, if the proposed changes are implemented there will be no upper age limit to membership. You will be able to join OSPS with effect from 1 January 2013. Like every other OSPS member, you must then have a minimum two years of service before you can claim retirement benefits.
- Once the new rules have been approved, we will be contacting all employees previously excluded because of their age to inform them of their eligibility to join OSPS with effect from 1 January 2013.