Spring 2001
WYPF name new AVC provider
Since 1988, when all pension schemes were required to give their members a way to pay extra contributions called Additional Voluntary Contributions or AVCs for short, the WYPF AVC Plan was provided exclusively by Equitable Life. But now, after a full and extensive review of AVC providers, we have selected Scottish Widows to run alongside Equitable Life.
Back in 1988, Equitable Life were the natural choice as our AVC provider. Most public sector pension schemes including the MPs' pension scheme thought so too. And our regular reviews confirmed they were the best provider, year after year. Equitable also had a large slice of private-sector pensions and AVCs. AVC plans give pension scheme members a chance to pay extra contributions to get a bigger pension when they retire.
But on 8 December last year, Equitable Life announced it had closed its doors to new business. Equitable's troubles stemmed from Guaranteed Annuity Rate policies they sold in the 1970s. When they came to maturity the policy holders took Equitable to task over the pay-outs. In the end Equitable paid for the courts to decide whether they were acting properly or not.
In August last year, the House of Lords decided that Equitable weren't being fair to Guaranteed Annuity Rate holders. Because of this decision, Equitable found a sizeable hole in their funds. Equitable put themselves up for sale to try to fill the hole, but by December it was clear that they weren't going to find a buyer.
Their 8 December announcement was designed to limit their liabilities. But now, Equitable's fixed assets and fixed client base means their investments are likely to be lower than they would otherwise have been. Because of this, we needed to find new AVC Plan providers. After a full and extensive review of AVC providers we have selected Scottish Widows to run alongside Equitable Life.
We are pleased that we can now offer our members a choice of AVC providers.
Paying Extra
Here's a roundup of all the ways you could pay extra to make sure your income is as good as it can be when you retire. There's more information in our Paying Extra section too.
First though there's one thing to say: You can pay up to 15% of your pay into your pension. So: if you pay 6% (that's most people these days) you could pay up to 9% to get bigger benefits. That's up to 1½ times your normal contribution; if you're on the protected contribution of 5% you can pay up to 10% to get bigger benefits. And that's up to twice what you normally pay. And on top of all that you can pay to a 'concurrent' Stakeholder pension too, if you earn less than £30,000 a year.
Additional Voluntary Contributions (AVCs)
The AVC provider invests your contributions so when you retire you can use the fund you've built up to buy an extra pension. You can buy the extra pension from us, or:
There are two different types of AVC to choose from:
In-house AVCs usually cost less to run than freestanding AVCs, so more of your extra contributions go towards your bigger benefits. Our in-house AVC providers are Scottish Widows and Equitable Life.
You can also use AVCs to increase the death grant of 2 years’ pay to up to 4 years. We pay the death grant if you die while you are still paying into WYPF.
Stakeholder Pensions
Stakeholder pensions, introduced in April this year, are designed to tempt more people to save for their retirement. But because you are already doing this through WYPF, you don't need to worry about Stakeholder pensions.
Even so, you can pay into WYPF and have a Stakeholder pension, as long as you earn less than £30,000 a year. This is called concurrency. If you want a concurrent Stakeholder pension you'll be able to arrange one yourself through most financial institutions.
There are two good things about concurrent Stakeholder Pensions:
Buying extra benefits direct in WYPF
You can pay extra contributions direct into WYPF to make both your pension and lump sum – and any other benefit which might be paid – bigger. But because the benefits from WYPF are absolutely guaranteed and fully inflation-proofed, paying extra contributions direct into WYPF can look expensive. And we have to check to make sure you're in good health when you start to pay the extra contributions too. Because if you have to retire on ill health once you start paying extra contributions direct into WYPF your extra contributions are guaranteed fully paid up.
WYPF wins national contract
A new national organisation has chosen WYPF to run the Local Government Pension Scheme for them. The Children and Family Court Advisory Support Service, or CAFCASS for short, is a new organization which came into existence on 1 April 2001.
Formed by the amalgamation of three existing bodies, the Family Court Welfare Group, Guardians ad Litem and the part of the Official Solicitor's Department that deals with cases related to children, CAFCASS operates throughout the whole of England and Wales.
CAFCASS will be using the Local Government Pension Scheme to provide pension cover for their employees. There's an LGPS administrator, like WYPF, in every county throughout the country, but CAFCASS were looking for just one administrator to run the LGPS for the whole of England and Wales. From all the LGPS administrators from around the country, they chose WYPF. It's rare for new organizations like CAFCASS to come along. So, we are very pleased they picked WYPF!
The Preston Case
Backdated membership for part-timers
In May last year, the European Court of Justice made a decision in an important case for pension schemes called the Preston Case. The case was about people who were kept out of pension schemes because they were part-time. Or more importantly, whether the 2-year limit on backdating, imposed by UK law, was legal under European law.
The European Court decided that this time limit wasn't legal. But because the decision went against UK law, the European Court actually passed the decision back to the House of Lords. They’ll decide how UK law needs to change to take the European Court’s decision into account. The House of Lords have now decided that in some cases, membership of the LGPS can be backdated as far back as 1976.
But before we can do anything about this, the scheme's rules will have to change. The Department for the Environment, Transport and the Regions (DETR), is responsible for the LGPS legal scheme rules. They now have to decide how the rules should change to incorporate the House of Lords' decision. When they've done that, rest assured, we'll let you know.
Does it apply to you?
At any time while you worked for your current employer have you been kept out of the pension scheme because you worked part time? If you have, then the Preston Case might apply to you. In May last year the European Court of Justice made a decision in the Preston Case that may eventually give you the chance to backdate your LGPS membership for the period you were kept out.
But first, 2 things must happen:
Have you left your employer recently, or are you expecting to leave soon?
If you have left recently, or you will be leaving soon, the Local Government Pension Committee of the Employers' Organisation suggests that you lodge a claim with the Employment Tribunal. You can get an Employment Tribunal claim form from your local Department of Employment Office. We’re sorry, but we won’t be able to give you a claim form.
Spring 2001