At its June 2015 meeting, the SHPS Committee discussed the DC structure of the Scheme in light of the recent ‘Pension Freedom’ changes introduced by the Budget 2014, which have affected all DC pension schemes in the UK since April 2015.
With effect from 6 April 2015, a DC pension scheme member aged 55 and over now has a greater choice about how to access his/her pension savings. The following options are available:
- The member can exchange his/her whole DC pension fund for a single lump sum; any amount over the tax free cash allowance (usually 25% of the fund) will be subject to income tax.
- The member can buy a pension through The Pensions Trust’s selected annuity provider, or via a provider of their choosing.
- The member can transfer to another pension provider to utilise other post-retirement solutions, such as flexible access drawdown (an option that is not currently available directly from The Pensions Trust).
The Pensions Trust is currently researching the impact of the ‘Pension Freedom’ changes, with a view to adapting the DC structure of the Scheme to meet member needs. In this respect, the Committee has noted that The Pensions Trust did not ‘rush in’ any changes, given that the members’ current DC funds have generally not yet reached significant sums and the majority are not close to retirement age. This approach will allow the Trust to monitor market demands and consider appropriate options based on experience and the choices made by members in the near future.