Your benefits will be deferred if you no longer work for the fire service, and your 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 FPS 2015 pensions are normally payable from your State Pension age (with a minimum age of 65 applying). However, if you became permanently incapable, due to ill health, of undertaking any regular employment your deferred pension will be paid, in full, immediately. There has to be an expectation that this infirmity will continue until State Pension age.
A member with a deferred benefit may, on or after his 55th birthday request early payment of your deferred pension. Early payment of the deferred benefits will be subject to actuarial reductions.
If the deferred benefits also include benefits from one of the earlier, final salary schemes (FPS 1992 or FPS 2006), these are due to come into payment at different times (age 60 for FPS 1992 and age 65 for FPS 2006). More information on any former FPS schemes’ benefits can be found in the ‘Deferred Benefits’ pages for those schemes.
At retirement, you will also have the option to receive a lump sum; you can commute (convert) up to one quarter of your pension to receive a tax free lump sum, so that for every £1 of annual pension given up, £12 of lump sum is received in return. If, however, it appears that HMRC tax limits will be breached (see below), you will only be able to commute some lesser percentage of pension to provide the maximum lump sum available within tax limits.
If you were a member of FPS 2006 prior to joining FPS 2015, you will also be able to commute up to one quarter of that pension to receive a tax free lump sum on the 12: 1 ratio explained above.
If, you were a member of FPS 1992 prior to joining FPS 2015, commutation works very differently: the amount of lump sum received per £1 of pension commuted (with the maximum still being one quarter of pension allowed to be commuted) is based on age-related actuarial factors that will provide a lump sum more generous that that available on the 12:1 basis.
Under HMRC rules, the maximum amount of tax free lump sum is restricted to 25% of the capital value of the pension benefits. If, when the member retires, your lump sum exceeds the HMRC allowance, the excess amount will incur tax charges. We will let members approaching retirement know if they will exceed the HMRC limits.
This is calculated using the formula:
[20 x pension + lump sum] divided by 4
If you were interested in exercising the commutation option, you will need to provide written notice before the first payment of pension is made.
Please note: The annual deferred statements do not include details of the commuted lump sum (other than it is 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.
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 2015 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 2015 benefits increased by 3% in April 2018, as this was the measure of increase identified by the Consumer Prices Index (CPI) in the year to September 2016.
If you left the pension scheme during 2016/17, the benefits shown will include the proportion of the 1% increase to which you are entitled to for this first year based on how many months, in the final scheme year, you paid into the scheme before you left (where part months of 16 days or more count as a full month).
As an alternative to keeping benefits deferred in FPS 2015, you may be able to transfer your fire pension rights to another pension arrangement, but not to other occupational or personal defined contribution schemes that provide flexible benefits.
The transfer payment will be in the form of a cash equivalent transfer value. Such schemes are often called defined contribution or money purchase schemes.
The regulations allow deferred benefits to be transferred to another pension scheme, providing the election to transfer is signed no later than the day before your State Pension age (the date when deferred benefits are due to come into payment).
Please be aware, however, that the new scheme may have timescales of their own, particularly if it is another public sector pension scheme.
If this is the case, an election to transfer must be made within 12 months of becoming eligible to join the new scheme otherwise you will lose the right to preferential terms.
It is therefore important that if you are considering a transfer of your deferred benefits, you need to contact your new pension provider as soon as possible to confirm your eligibility to transfer and associated timescales.
Finally, any transfer of benefits to a new pension scheme must be made no later than one year before your State Pension age.
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 2015 pays dependants’ pensions to spouses, civil partners and nominated cohabiting partners (who meets the criteria to receive a partner’s pension) equal to half of your deferred pension (albeit pensions for civil partners and nominated partners will be based on your service from April 1988 only).
FPS 2015 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 pension benefits are reduced 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.
If you re-join the fire service (or recommence pension contributions if you had remained in service but had opted-out of the pension scheme) you will re-join FPS 2015.
If you returned to active membership within 5 years of leaving, your deferred member's account would be closed and your active member's account would be re-established as if you had remained in pensionable service during the break but had received no pensionable pay for that period.