Public Service Pension Schemes
Coverage
Automatic enrolment
- Public service employers (in: the civil service, the judiciary, teaching, local government, the national health service, fire and rescue services, the police and armed forces) must automatically enrol employees of qualifying age (between twenty-two and state pension age) if they earn over a threshold amount.
Opting out
- Individuals may always opt out of occupational schemes. But the individual will still be automatically enrolled into the scheme every three years if they are eligible.
Opting in
- If the employer is not obliged to automatically enrol the employee, they must still let the employee join the scheme if they wish to do so.
Financing
General finances
- PAYG-financed from contributions, apart from local government pension schemes, which are capital-funded.
Contribution rates
- In general, there is a variation of employer and employee contribution rates depending on such factors as the size of the employee’s income and the nature of the occupation.
- The armed forces pension scheme is the only scheme that is non-contributory for the employee, with all relevant contributions being borne by the state. Members may opt to make additional pension payments however, to increase the pension benefits they will receive.
State support & incentivising strategies
- Tax reliefs will generally be comparable to those afforded to employees in private sector occupational pension schemes; in particular, no tax will be due on contributions that fall below the employee’s annual allowance.
Administration
- The schemes are run by scheme managers, which are advised by pension boards.
- In local government pension schemes there are also pension committees or investment committees that manage the pension funds and their investment.
- Scheme policy is set out in regulations by the relevant minister and government department.
- The Pensions Regulator is responsible for the regulation of these schemes.
Qualifying Conditions
Qualifying conditions
- For teachers, civil service workers, NHS workers and local government workers the qualifying pension age is linked to the state pension age.
- The pension age for firefighters and those in the police and armed forces is 60.
- To qualify for any benefits, two years’ qualifying service will usually be necessary.
Early retirement
- In the armed force an early departure payment (in the form of a lump sum and monthly allowance) is available from the age of 40, if the relevant individual has completed 20 years of service and has left the regular service. Upon reaching state pension age, the monthly payment will change to a pension.
- Those in other occupations may claim the pension, in a permanently reduced form, from the age of 55. The reduction is proportionate to how early the retirement is claimed.
Deferred retirement
- Individuals who defer claiming their pension beyond the state pension age, will enjoy positive (permanent) adjustments to pension benefits at a set percentage.
Combining employment & retirement
- Termination of employment is not a precondition for claiming pension benefits.
- Depending on the precise occupation, and usually subject to the agreement of one’s public service employer, partial retirement may be available.
Benefits
Pension benefits
- These schemes are statutory defined benefit (DB) pension schemes.
- Pension benefits are (following the Public Service Pensions Act 2013) based on Career Average Revalued Earnings (CARE) rather than the final salary of an individual.
Taxation and social security contributions
- Once state pension age is reached, one no longer pays National Insurance contributions, but will still be liable to pay income tax.
Coverage
Financing
Administration
Qualifying Conditions
Benefits
Automatic enrolment
- Public service employers (in: the civil service, the judiciary, teaching, local government, the national health service, fire and rescue services, the police and armed forces) must automatically enrol employees of qualifying age (between twenty-two and state pension age) if they earn over a threshold amount.
Opting out
- Individuals may always opt out of occupational schemes. But the individual will still be automatically enrolled into the scheme every three years if they are eligible.
Opting in
- If the employer is not obliged to automatically enrol the employee, they must still let the employee join the scheme if they wish to do so.
General finances
- PAYG-financed from contributions, apart from local government pension schemes, which are capital-funded.
Contribution rates
- In general, there is a variation of employer and employee contribution rates depending on such factors as the size of the employee’s income and the nature of the occupation.
- The armed forces pension scheme is the only scheme that is non-contributory for the employee, with all relevant contributions being borne by the state. Members may opt to make additional pension payments however, to increase the pension benefits they will receive.
State support & incentivising strategies
- Tax reliefs will generally be comparable to those afforded to employees in private sector occupational pension schemes; in particular, no tax will be due on contributions that fall below the employee’s annual allowance.
- The schemes are run by scheme managers, which are advised by pension boards.
- In local government pension schemes there are also pension committees or investment committees that manage the pension funds and their investment.
- Scheme policy is set out in regulations by the relevant minister and government department.
- The Pensions Regulator is responsible for the regulation of these schemes.
Qualifying conditions
- For teachers, civil service workers, NHS workers and local government workers the qualifying pension age is linked to the state pension age.
- The pension age for firefighters and those in the police and armed forces is 60.
- To qualify for any benefits, two years’ qualifying service will usually be necessary.
Early retirement
- In the armed force an early departure payment (in the form of a lump sum and monthly allowance) is available from the age of 40, if the relevant individual has completed 20 years of service and has left the regular service. Upon reaching state pension age, the monthly payment will change to a pension.
- Those in other occupations may claim the pension, in a permanently reduced form, from the age of 55. The reduction is proportionate to how early the retirement is claimed.
Deferred retirement
- Individuals who defer claiming their pension beyond the state pension age, will enjoy positive (permanent) adjustments to pension benefits at a set percentage.
Combining employment & retirement
- Termination of employment is not a precondition for claiming pension benefits.
- Depending on the precise occupation, and usually subject to the agreement of one’s public service employer, partial retirement may be available.
Pension benefits
- These schemes are statutory defined benefit (DB) pension schemes.
- Pension benefits are (following the Public Service Pensions Act 2013) based on Career Average Revalued Earnings (CARE) rather than the final salary of an individual.
Taxation and social security contributions
- Once state pension age is reached, one no longer pays National Insurance contributions, but will still be liable to pay income tax.
Legal Basis: Public Service Pensions Act 2013; The Armed Forces Pension Regulations 2014; The Armed Forces Early Departure Payments Scheme Regulations 2014; Superannuation Act 1972; The Public Service (Civil Servants and Others) Pensions Regulations 2014; The Teachers’ Pension Scheme Regulations 2014; The Teachers’ Pensions Regulations 2010; The National Health Service Pension Scheme Regulations 2015; The Firefighters’ Pension Scheme (England) Regulations 2014; The Firefighters’ Pension Scheme (Scotland) Regulations 2015; The Police Pensions Regulations 2015; The Police Pensions Regulations 2006; The Police Pensions Regulations 1987; The Judicial Pensions (Fee-Paid Judges) Regulations 2017; The Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016; The Local Government Pension Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014; The Local Government Pension Scheme Regulations 2013.