Additional Voluntary Contributions
If you paid Additional Voluntary Contributions (AVCs) in addition to normal MPS contributions, and did not transfer your AVC fund to another arrangement, you will have built up an AVC fund with the Prudential Assurance Company, the company chosen by the Trustees to manage the Scheme’s voluntary contributions arrangement.
Your AVC fund will provide additional benefits at the time your main MPS benefits become due for payment and can be used to buy an annuity, which provides you with a pension for life and, if you choose, for your dependants, or a lump sum.
The AVC has an ‘Open Market Option’, which means that you can take an additional pension with any provider you choose at retirement.
In order that you can make a comparison, a quotation request form will be sent at the same time as your MPS retirement options. Up to four quotations can be requested from the Prudential.
The quotation request form sent to members who have large AVC funds will include details of an independent annuity broker, Hargreaves Lansdown, who can help to select an annuity from all providers.
Following the tax changes introduced in April 2006, a deferred member can take some (or, in many cases, all) of his AVC fund as a tax-free lump sum, as opposed to having to take it all as pension. As explained in the section Deferred Pensioners, there is also an option to take part of the benefit from the main scheme as a lump sum rather than pension.
If you wish to take a cash lump sum, whatever the total amount that you wish to receive as cash (from your AVC fund and from the MPS, taken together), it is likely to be in your interests to take as much of that sum as possible from your AVC fund rather than from the MPS. This is because the rate at which AVC pension is converted to lump sum is currently more favourable than the corresponding rate which currently applies under the terms of the MPS.
Information about the AVC policy itself can be obtained from the Prudential’s website.
If you paid AVCs and have not yet drawn your benefits, you will receive details of your AVC fund in a separate benefit statement. For any questions about an AVC fund, or the benefits from an AVC fund, please contact the Administration Office at the address in the section Useful Contacts.
If you become unable to manage your pension because of physical or mental incapability, the Committee of Management can appoint a relative or other person to act as payee to receive the pension on your behalf, providing the payee uses the pension payments for your benefit. Further details of these arrangements are available from the Administration Office.
The benefits provided for MPS membership are set out in the Rules and the Scheme’s Trustees have a duty to pay benefits in accordance with the provisions of those Rules.
However, the Trustees may, in certain circumstances, pay discretionary benefits. Where your MPS benefits are not yet in payment, the Trustees currently have a discretionary power to grant early payment of unreduced MPS benefits in extreme and exceptional circumstances, whatever your age. For example, discretionary benefits may be claimed where a deferred member provides medical evidence to show that life expectancy is limited to eighteen months or less as a result of terminal illness.
Please do not delay a claim in such circumstances. If you need further information about discretionary benefits, please contact the Administration Office at the address shown in the section Useful Contacts.
Any member who is involved in divorce proceedings should always consult a solicitor for guidance. The following information provides a general outline of the way in which Scheme benefits might be affected following a divorce. It should be noted that there are differences in the way family law is administered in Scotland to the way it is administered in England and Wales.
When a couple divorce or separate, the court must give full consideration to the value of the pension rights of each spouse or partner. To do this, a calculation of the pension rights of one or both parties will be needed. On request, the Scheme will provide the member with a valuation for divorce purposes. A valuation can also be provided to a solicitor acting for either party, provided the member’s written authorisation is received. In certain circumstances, the Scheme is entitled to make a charge for this information.
There are three ways in which pension rights can be divided when a couple divorce or separate. The first is called ‘offsetting’, in which the pension value is included in the assessment of the value of the couple’s assets – for example, a family home.
The two remaining methods are:
- Earmarking – part of the member’s pension is set aside for the benefit of the former spouse, to come into payment when the member retires, (or is immediately effective if the member has already retired), or dies. Depending on the terms of the court order, payment of benefits to both parties will cease on the death of the member.
- Pension sharing – an alternative option where divorce proceedings were filed after 1 December 2000. The member gives up an agreed share of his pension value, which is used to create a pension in the former spouse’s own name. If the former spouse is of Pensionable age then pension income can start straight away and will be paid for life. If she has not reached Pensionable age at the date of divorce, then the fund is set aside to provide a pension from her retirement date. The share belonging to the former spouse may stay in the Scheme for payment on retirement, or can be transferred to another qualifying pension arrangement. In contrast to Earmarking orders, benefits payable to the former spouse under a Pension Sharing Order are unaffected by a subsequent change in the scheme member’s position – for example, his marital status, or his death.
The Scheme is entitled to make a charge for the provision of specific divorce information and for the complex process of implementing a court order. We will not generally begin work or accept a court order without payment of the appropriate charges.
A leaflet outlining the legal position on pensions and divorce, showing the current charges payable, can be found in the section Scheme Publications.