How does my pension build up?
The Scheme year runs from 1 April to 31 March. For each Scheme year (or part year) that you are an active CAB 2011 member, you build up a block of pension equal to 1.67% of your pensionable salary, payable at normal pension age.
Following the end of each subsequent Scheme year, each block of pension will increase in line with the lower of the percentage increase in the Government's consumer prices index (CPI) published for the previous calendar year ending 31 December and 4%. The first time a block of pension will be increased under CAB 2011 will be 1 April 2013. The increase will apply to the block of pension built up in the year ending 31 March 2012. From 1 April 2017, the BBC may ask the Trustees to jointly agree a different revaluation percentage in certain circumstances, such as following periods of sustained negative deflation or if the BBC's income has reduced significantly.
Further detail around these conditions can be found in the ACAS agreement here.
In the event that agreement cannot be reached between the BBC and Trustees the Scheme actuary will decide. Once awarded, increases cannot be reduced.
Your pension is the total of all the blocks of pension you have built up, plus increases.
When can I take my pension?
Payment at normal pension age
You can leave service at normal pension age, age 65, with an immediate pension that is payable for life.
If you have two or more years' pensionable service, you can leave service and ask for your pension to be paid early at any time from age 55 onwards. Early payment requires the BBC's agreement, and your pension will be less than that payable at normal pension age. This is because:
- it is based on the pension you have built up when you leave service and is, therefore, less than if you had continued as an active CAB 2011 member until normal pension age; and
- it will be reduced to allow for it being paid for a longer period than expected.
The reduction depends on your age at the time your pension comes into payment. The scale of reductions is set by the BBC and the Trustees at the beginning of each calendar year. The following percentages are currently in use:
Retirement age 55 56 57 58 59 60
% reduction 50 46 42 38 34 30
Retirement age 61 62 63 64 65
% reduction 24 18 12 6 0
Between birthdays the reduction is proportionate.
Here is an example of how an early pension is calculated:
Total pension built up to date - Early payment reduction = Early payment pension
John leaves the BBC on his 60th birthday, his pension including discretionary increases awarded to date, is £10,000 p.a. If he decides to defer taking it until normal pension age, it will continue to attract the same discretionary increases as are awarded to active CAB 2011 members. It will then be paid without reduction when he reaches age 65. If he asks for immediate early payment of his pension, it will be reduced by 30% (see table above).
John's early payment pension is : £10,000 less 30% = £7,000 p.a.
You can continue working after age 65 and remain an active CAB 2011 member. You will continue to build up a pension which will be paid when you eventually leave service or reach age 75, whichever is earlier.
You will stay in Smart Pensions (see page 3), but will not have to pay National Insurance contributions after State Pension Age.
If you have two or more years' pensionable service and are aged at least 55, you can ask for your pension to be paid, while continuing to work for your employer, provided that the BBC agrees. Any pension taken before normal pension age under the flexible payment provisions will be reduced for early payment. A leaflet explaining flexible payment in more detail is available from the pension service line.
Incapacity means physical or mental impairment that, on the evidence of a doctor or other qualified person appointed by the BBC, the Trustees are satisfied:
- that you cannot carry out your normal occupation; and
- it is likely permanently and substantially to impair your earning capacity.
- If you leave service because of incapacity before normal pension age, you will receive an immediate pension, provided the BBC and the Trustees agree.
- If you have completed less than two years' continuous pensionable service, the pension will be reduced for early payment.
- If you have completed two or more years' continuous pensionable service and you are:
- unable to carry on your normal occupation, the pension will not be reduced for early payment; or
- unable to follow any occupation; the unreduced pension will be increased by the additional pension you would have built up, without revaluation, had you remained an active CAB 2011 member until normal pension age on your current pensionable salary.
Incapacity pensions are subject to review and can be stopped if the Trustees believe that a member has recovered to any extent.
Can I exchange part of my pension for cash?
You can exchange part of your pension for a lump sum cash payment, which is currently paid tax-free by the Scheme. This is known as 'commutation'. The maximum lump sum you can take is currently four times your pension. If you take cash, your pension will be reduced by a commutation factor.
The commutation factors are set by the BBC and the Trustees at the start of each calendar year. Currently, for every £12 cash that you take your pension is reduced by £1 p.a. Full details will be sent to you before your pension comes into payment.
Taking cash does not affect the pension payable to your qualifying spouse, qualifying civil partner or dependants. It will still be calculated on your full pension, as though you had not chosen to exchange part of it for cash.
Before making the decision to exchange pension for cash, you should consider taking Independent Financial Advice.
Does my pension increase after it starts?
CAB 2011 pensions are reviewed annually and any increases are awarded on 1 April. The Trustees currently increase pensions in payment by the lesser of:
- the rise in the Consumer Prices Index (CPI) for the previous calendar year ending 31 December; or
Increases are calculated on your actual pension in payment.
When the rise in the CPI is greater than 4%, the BBC and the Trustees may jointly award a different increase.
Increases are reported in the annual report, a copy of which can be downloaded here.