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The Superannuation Arrangements of the University of London |
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SAUL Employer Consultation: Frequently Asked Questions for active members contributing to SAUL on 1 July 2012 If you have any questions about the proposals which aren’t answered here, please contact your employer’s Pensions Officer or put your question on the Consultation section of the website. The consultation is between you and your employer so SAUL Trustee Company cannot enter into individual correspondence. The website will publish all questions put through the online consultation, and the responses. |
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Quick Links |
Why are changes to SAUL needed? The funding shortfall is so small – why does SAUL need to change? When are the proposed changes going to start? How have my interests been represented in the negotiations? How will the change in the pensions increase affect me? If I leave Pensionable Service will the change in the pensions increase affect me? Do the proposals affect my entitlement if I retire early? Why are pensions reduced for early retirement and how does this work? What happens if I leave Pensionable Service and then rejoin in the future? Can I opt to join the CARE section? Will I still get a Final Salary pension? If I’m not currently an active member of SAUL can I join on a Final Salary basis? Why do I have to apply by 31 May 2012 to join on a Final Salary basis? Are you changing the benefits I’ve already built up? Will there be any more changes? Will my response be considered? Will changes to State Pension Age affect when I can receive my SAUL pension? I have transferred benefits into SAUL – will they be affected? I have an AVC contract - will it be affected? If I’m made redundant will these changes affect my entitlement? What about the benefits for my family and dependants if I die? I have more questions – who should I ask?
Why are changes to SAUL needed? The cost of providing defined benefit pension schemes has been rising in recent years. This increase has been due to a combination of improving life expectancy and lower expected investment returns. Also, the preliminary results of the 2011 Actuarial Valuation show that SAUL has a funding shortfall. The proposals are expected to safeguard the sustainability of SAUL so it remains affordable for members and employers while continuing to provide high-quality pension, lump sum and death benefits. You can find out more about why changes are needed here.
No – and there is no need to be concerned. The funding shortfall is small since the £81 million shortfall is only 5% of SAUL’s liabilities. The proposals are expected to tackle the funding shortfall and long-term funding pressures so SAUL returns to full funding.
A funding shortfall occurs when the value of the pension fund is not enough to cover the liabilities (the benefits promised to members).
The funding shortfall is so small – why does SAUL need to change? The funding shortfall is equal to only 5% of SAUL’s liabilities but the continued uncertainty since the financial crisis means that SAUL cannot rely on future investment returns to reduce the deficit.
When are the proposed changes going to start? 1 July 2012.
No. The Employers and Trade Unions do not want to make SAUL unaffordable for members or Employers. Therefore, under the proposals, contributions will stay at 6% of Salary for members and 13% of Salary for Employers. The changes are expected to tackle the funding shortfall while maintaining the current contribution rates.
How have my interests been represented in the negotiations? Your interests have been represented by the recognised Trade Unions: Unison and Unite. They have represented the interests of all members and eligible employees regardless of whether they are Trade Union members.
How will the change in the pensions increase affect me? The proposals say that when you receive your SAUL pension, benefits built up from 1 July 2012 will increase in line with the Consumer Prices Index (CPI) but will be capped if the increase is above 5%. You can find details about how the cap works here. The benefits you built up before 1 July 2012 will continue to increase in line with CPI without a cap.
If I leave Pensionable Service will the change in the pensions increase affect me? If you leave Pensionable Service and keep (or “defer”) benefits in SAUL, these increase until retirement. Currently, deferred benefits increase by the greater of increases required by law and increases granted at the Trustee’s discretion. Under the proposals, benefits built up from 1 July 2012 will increase by the greater of:
The Trustee will retain the right to provide discretionary increases above these levels.
Do the proposals affect my entitlement if I retire early? If you remain an active member of SAUL, you will still be able to retire from age 60 without having your pension reduced – unless the Trustee decides otherwise, which it currently does not intend to do. If you leave Pensionable Service, benefits built up from 1 July 2012 will be reduced if you retire before age 65. Benefits you built up before 1 July 2012 will be reduced if you retire before age 60.
Why are pensions reduced for early retirement and how does this work? If you retire early we expect to pay your pension for longer. We calculate members’ benefits with reference to Normal Pension Date (currently the last day of the month before your 65th birthday). If you retire at age 55 your pension will be paid 10 years earlier than expected – which is why it is reduced. Currently members’ benefits are reduced if they retire before age 60.
What happens if I leave Pensionable Service and then rejoin in the future? If you rejoin SAUL within 30 months of leaving Pensionable Service you’ll build up benefits in the same way as on the date you leave – on a Final Salary basis. If you rejoin SAUL more than 30 months after leaving you’ll rejoin the CARE section of SAUL. There’s more information about the CARE section here. If you leave Pensionable Service before 1 July 2012 you’ll be able to rejoin SAUL on a Final Salary basis until 31 December 2014.
I’ve heard that members who join SAUL after 1 July 2012 will be in a new section of SAUL called CARE – what is it? Under the current basis a member receives 1/80 of Final Salary for each year of service. Under CARE a member receives 1/80 of the Salary paid in each year. Each year’s benefit is then increased to retirement in line with the Consumer Prices Index, which is capped as described here. Put simply: The example below shows how CARE works for a member of SAUL over four years. It shows:
Can I opt to join the CARE section? No – if you’re a member of SAUL before 1 July 2012 you’ll be in the Final Salary section of SAUL. This means you’ll continue to build up benefits in the same way as you do at the moment. You can’t choose to join the CARE section.
Will I still get a Final Salary pension? Yes. If you’re an active member of SAUL before 1 July 2012, you’ll build up benefits on a Final Salary basis. For new members joining after 1 July 2012 benefits will be based on Career Average Revalued Earnings (CARE). You can find more information about CARE here.
If I’m not currently an active member of SAUL can I join on a Final Salary basis? If you previously opted out of SAUL membership, you can apply to rejoin SAUL, subject to being in good health. If you rejoin before 1 July 2012, you will build up benefits on the existing Final Salary basis. If you have deferred benefits in SAUL, you have 30 months from 1 July 2012 to rejoin SAUL on a Final Salary basis. If you would like to apply to rejoin SAUL on the Final Salary basis, please contact your employer’s Pensions Officer. You should apply before 31 May 2012.
Why do I have to apply by 31 May 2012 to join on a Final Salary basis? SAUL’s Rules say that you join on the 1st of the month after your date of application. Members applying during June would normally join on 1 July 2012 which will be on a CARE basis.
Are you changing the benefits I’ve already built up? No – by law we can’t change the benefits you have already built up in SAUL. None of the proposals affect the benefits you have already built up in SAUL.
Will there be any more changes? We can’t predict what will happen in the future but there are no plans to make further changes to SAUL. The proposals aim to tackle the funding shortfall – and ensure the sustainability of SAUL - so that no further changes will be required.
Will my response be considered? The Employers must genuinely consider all feedback to the proposed changes. Under the Rules of SAUL, the Negotiating Committee, which has an equal number of representatives from the Employers and the recognised Trade Unions, is the body with the power to propose changes to the Rules to the Trustee. So the SAUL Negotiating Committee will consider all the individual Employers’ responses and make a final recommendation to the Trustee.
Will changes to State Pension Age affect when I can receive my SAUL pension? If you’re an active member before 1 July 2012 the changes to State Pension Age will not affect your SAUL pension. Normal Pension Date in SAUL will remain the last day of the month before your 65th birthday.
I have transferred benefits into SAUL – will they be affected? No – by law we can’t change benefits you already have in SAUL. The benefits you have already transferred into SAUL will still be calculated on a Final Salary basis under the current SAUL Rules.
I have an AVC contract - will it be affected? No – by law we can’t change benefits you already have in SAUL. The benefits you have built up already – and in the future under your current AVC contract - will still be calculated on a Final Salary basis under the current SAUL Rules.
If I’m made redundant will these changes affect my entitlement? No – under the SAUL Rules, if you’ve completed five years qualifying service, reached minimum retirement age and are made redundant, your entitlement to an immediate unreduced pension (which is funded by your employer) remains the same.
What about the benefits for my family and dependants if I die? There are no proposed changes to the benefits payable on death.
I have more questions – who should I ask? If you have any questions about the proposals which aren’t answered here, please contact your employer’s Pensions Officer or put your question on the Consultation section of the website. The consultation is between you and your employer so SAUL Trustee Company cannot enter into individual correspondence. The website will publish all questions put through the online consultation, and the responses. |
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