Your benefits will be deferred if you no longer work for the fire service, and the benefits have not yet come into payment. Or, you may still be employed by your Fire & Rescue Authority, but decided to opt-out of the pension scheme and didn’t qualify for a refund of pension contributions.
Deferred pensions in the 1992 scheme are calculated as a proportion of the pension you would have expected at Normal Pension Age (NPA); the earlier of your 55th birthday, or when you would have achieved 30 years’ maximum scheme membership, had you remained in service. The pension calculated is then proportioned by the actual scheme membership achieved:
B * C / D
B = Notional Pension
C = Period in years of pensionable service
D = Period in years of notional service
Notional Pension and Notional Service is the service and pension you would have expected to receive if you had not left the scheme.
Deferred FPS 1992 pensions are payable from age 60, or from any earlier date if you become permanently incapable of engaging in firefighting, or performing any other duties appropriate to your former role as a firefighter.
At retirement, you will also have the option to commute part of your pension; up to a quarter of your pension in exchange for a lump sum.
Under HMRC rules, the maximum amount of tax free lump sum is restricted to 25% of the capital value of your pension benefits. If, when you claim your benefits, your lump sum exceeds the HMRC allowance, the excess amount will incur tax charges. We will advise you at retirement, if you exceed this limit. This is calculated using the formula;
[20 x pension + lump sum] divided by 4.
Notice of commutation must be given no earlier than 4 months before and no later than the day before your intended retirement date.
Please note: The annual deferred statements do not include details of the commuted lump sum (other than referring to it as an option at retirement to commute some of the pension to receive one). As the factors governing commuted lump sum can change with little, or no, advance notice, we believe it imprudent to quote a lump sum figure that could be very different from the actual amount at retirement.
If you had pensionable service before 1 April 1980, this would likely have resulted in a modified pension (superannuation) contribution rate being paid (the basic rate less 6p per week). If you paid this ‘modified’ rate your pension will be reduced at State Pension Age by £1.70, for each year of service that the ‘modified’ rate was paid.
HMRC Tax Rules
The FPS has to comply with rules set by HMRC. There are, for example, limits on the amount of pension and lump sum which can be taken by a pension scheme member before tax charges apply. When benefits are due the total value must be tested against the lifetime allowance, which is set annually. If the value exceeds this limit (currently £1.03 million), tax will be deducted and paid over to HMRC.
This test is in respect of all pension benefits you may have accrued over your working life, not just FPS. You will be asked to provide statements in respect of any other pensions you may have so we can check for breaches before making payment. For more information visit: www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm080000.
FPS 1992 benefits are designed to keep pace with inflation and are index linked every April, both in deferment and after they come into payment. Deferred FPS 1992 benefits increased by 3% in April 2019, as this was the measure of increase identified by the Consumer Prices Index (CPI) in the year to September 2018.
If you left the pension scheme during 2019/20, the benefits shown will include the proportion of the 3% increase to which you are entitled to for this first year.
Please note: annual pension increases are paid if the pension was paid early due to you being permanently disabled from regular full-time work of any kind.
Transfers to other pension schemes
As an alternative to keeping benefits deferred in FPS 1992, you may be able to transfer your fire pension rights to another pension arrangement, but not to other occupational or personal defined contribution pension schemes that provide flexible benefits.
You should be aware that there may be time limits that apply. The regulations allow benefits to be transferred to another pension scheme, providing the election to transfer is signed within 6 months of joining the new scheme or such longer period as your former Fire & Rescue Authority allows. If your new scheme is another public sector pension scheme, an election to transfer must be made within 12 months of becoming eligible to join the new scheme, otherwise the right to preferential transfer terms will be lost.
Finally, any election to transfer must be made before your 59th birthday (this being a year before your deferred benefit age of 60).
You should think very carefully before transferring your benefits to another arrangement. You can get free, impartial information about transferring your pension from:
Death before payment
If you die before your benefits come into payment, there are benefits payable to eligible dependants.
Details of the pensions payable to adult survivors, as well as children, can be found in the ‘Death Benefits’ area, but in brief FPS 1992 pays dependants’ pensions to spouses or civil partners, equal to half of your deferred pension (albeit pensions for civil partners will be based on your service from April 1988 only). However, if the surviving spouse or civil partner later remarries, forms a new civil partnership or cohabits, your pension will stop.
FPS 1992 does not pay a death grant (lump sum) following the death of a deferred member.
If a court has issued a Pension Sharing Order, your benefits will be reduced at retirement to reflect the percentage of your pension rights allocated to your ex-spouse.
As an alternative, a court could issue an Earmarking Order, that also awards pension rights to an ex-spouse, but these do not take effect until your benefits come into payment, and is therefore not taken into account in the annual benefit statements we produce.
Re-joining the Fire Service
If you re-join the fire service (or recommence pension contributions if you are still in service but had opted-out of the pension scheme) you will not be allowed to re-join FPS 1992. You will be eligible to join either FPS 2006, or FPS 2015, depending on your age and how long ago it was since you left FPS 1992.