Why is the BUC making this proposal?

Following proposals by the BUC Executive Committee, on the back of consultations between all the participating employers, the Trustees and the BUC have, since 2013 taken significant steps to improve the Plan’s funding level and ensure there is sufficient money in the Plan to meet the costs of your future benefits. These include closing the Plan to new members and future accrual from 2013, as well as the employers paying significant contributions into the Plan in the past.

Taken together these actions have significantly improved the Plan’s financial position, with the BUC and the Trustees working closely together. The BUC has now requested the Trustees take the next, and potentially final, step on this journey which would be to transact with an insurer, known as a buy-in, to further de-risk the Plan and provide security for your benefits for the future.

Initial investigations into this next step have confirmed the current link between your Plan pension and your salary is not a benefit that can be insured. Having carefully reviewed all the options available to address this issue, and taken professional advice, the BUC has concluded the best way to proceed for the benefit of all stakeholders of the Plan is to get employed members’ agreement to break the link to salary.

What is a buy-in?

Simply put, a buy-in is an insurance policy bought in the name of the Trustees and held as an asset of the Plan. This policy pays an income equal to your benefits - largely removing the risk of there being not enough assets to meet future payments.

Does this mean the BUC is going to wind-up the Plan?

The Trustees will write to all members in the Plan if it decides to proceed to secure the Plan benefits with an insurance company. This doesn’t necessarily mean the Plan will wind-up immediately, although it could do in the future once benefits have been appropriately insured in accordance with the Plan rules.

What has been the Plan Trustees’ involvement in the proposal?

The BUC has informed the Plan Trustees of its proposals and has been working closely with them to consider the merits of an insurance transaction. 

As the proposal is for each participating employer to seek direct consent from its employees to make the changes, the Trustees don’t have a formal role in the Consultation Process or amending the Plan Rules.

Employees can continue to raise questions with the Trustees about their current benefits by contacting them via the Plan administrators on Adventist@Barnett-Waddingham.co.uk or call 0333 11 11 222. It’s important to know, neither the Trustees, administrators, the BUC nor your employer can provide you with financial advice.

What if I have a question, comment, or object to the proposal?

The purpose of this consultation is to make sure you understand the proposal and for you to share your views and comments before a final decision is made.  We need your feedback by 21 March 2025 which you can email to secretariat@adventist.uk

What happens after the consultation?

During the Consultation Process the BUC will keep you updated and respond to any questions or concerns the BUC receives.  Following the end of the consultation period, the BUC will make a final decision with your employer in respect of the proposed changes.

After the consultation, your employer will send a letter confirming the outcome. If the BUC decides to proceed with the proposed changes, then the required formal documentation will be prepared. This will require you to provide your consent to your employer to effect the changes. If the BUC decides not to proceed then they’ll review the issue again. 

The 2013 Pension Changes

Why was the Plan closed to accrual in 2013?

Back in 2013, the BUC carried out a similar 60 day consultation with employees on the proposal to close the Plan to future accrual, such that employees would no longer continue to build up new pension in the Plan after 31 December 2013 (‘the closure date’).

The reasons for the proposal were to help manage the increasing cost and risks of running the Plan and to allow the Church to meet its auto-enrolment obligations in the most efficient way.

Following consultation, the proposal was implemented and as a result the Plan was closed to future accrual.

Why was a link to my salary maintained?

As part of the proposals, the BUC decided to keep the link to your salary from the closure date. This was because, at the time, the Church felt it remained an important part of your overall pension benefits.

This meant instead of your pension earned up to the closure date being increased only by reference to inflation, your pension has been increased by reference to the increase in your salary. It is also guaranteed to be no less than the inflation-linked pension you would have got had you left service at the closure date.

Is this why I’m in both a defined benefit (DB) and defined contribution (DC) pension plan?

Yes, once the Plan closed to future accrual, you could no longer build up new benefits in the Plan (a defined benefit plan). Instead, you were auto enrolled into the DC Scheme with Legal & General.

Therefore, from 1 January 2014 you have received contributions into your DC pension with Legal & General, whilst also retaining your entitlement to the DB pension built up in the Plan.

As explained as part of the consultation, the Church is now comfortable that increasing contributions to the DC pension plan for a period is an appropriate replacement for the current salary link.[FD1] 

What is a defined benefit (DB) pension?

A DB pension is a promise to pay you an income in retirement based on your service and salary. Your pension in the Plan is a DB pension.

How much income you’ll receive depends on a variety of factors:

• Years of service – this is how long you are an active member of the Plan, not how long you’ve been employed by the Church. In the Plan, for employed deferred members, years of service is measured up to 31 December 2013.

• Accrual rate –this is the rate your benefits build up for each year of service. In the Plan it is one percent (1/100th) of your Final Salary.

• Final Salary – this is currently calculated at the date you retire, leave employment, die or opt out of being an employed deferred member under the Plan, whichever is earlier.

• Age at retirement: Your pension can be reduced or increased for early or late payment, depending on the age you choose to start taking your pension.

 The combination of factors above allows the Trustees to calculate your DB pension in the Plan, which is the amount of pension you’ll receive each year and is usually paid monthly.

In comparison, what is a defined contribution (DC) pension?

In a DC pension, like the Legal & General DC Scheme, you have your own pension account where all payments are made. The value of your pension account at retirement will depend on the following factors:

• Timeframe – how long you’re in the DC Scheme

• Contributions – how much is paid in by you and your employer

• Net investment returns – the potential growth of your investments, minus any charges

The combination above then gives you your:

• Pot of money – the value of the pot of money is what you will have to spend on your retirement benefits. You have a number of options in the Legal & General DC Scheme.

You have control over how much you pay in, how your savings are invested and how you decide to take your savings when the time is right for you.

The Impact on my Benefits

Will I still keep my DB benefits in the Plan?

Yes, if the proposal goes ahead you will still keep the benefits you’ve built up in the DB Plan and you’ll be entitled to receive a pension income on your retirement. However, you will lose the link to your salary as explained in the question ‘Why is the BUC making this proposal?’

In return for agreeing to this you’ll receive an additional 2.5% of salary into the DC Scheme for three years.

There’ll also be some areas where your DB benefits from the Plan will be enhanced in certain circumstances – see:

• What happens if I had a right to an unreduced pension from age 62 after 35 years of service?;

• What if I retire in ill-health?; and

• If the proposal goes ahead, will I still have a cash sum death in service benefit?

Is there a difference between the salary definition used for the Plan and those used to calculate contributions payable into the DC Scheme?

Yes, there are different salary definitions, and the salary figure used to calculate your DB pension in the Plan is not the same salary figure used to calculate your DC contributions.

In the Plan, your benefits at the earlier of retirement, leaving employment, death or when you opt out of being an employed deferred member are defined by reference to your final pensionable salary at the relevant date. Your final pensionable salary is your pensionable salary multiplied by your average personal salary factor at that time. Pensionable salary is defined as 90% of the pensionable proportion of the Church’s salary package.

Under the proposals, your pension in the Plan will be calculated based on your pensionable salary and average personal salary factor as at 30 June 2025. If you have Old Scheme benefits (also called “suspended obligations”, these are calculated by reference to your pensionable salary only and do not allow for your average personal salary factor.

In the DC Scheme, your contributions are based on your full salary package and so, for all employees, the salary used to calculate your DC Scheme contributions is higher than the salary used to calculate your Plan benefits.

Will my pension benefits in the Plan still increase before I retire?

If the proposal goes ahead, from 30 June 2025 your pension benefits will revalue with inflation in line with the Plan Rules (subject to a cap) up to your Normal Retirement Date (NRD), which is your 65th birthday.

Does the proposal affect when I can retire?

No. You can retire on or before your 65th birthday or you can delay taking your benefits after your 65th birthday up to age 75, and you will also have the option to exchange part of your pension for a cash sum where permitted under the Plan’s Rules (payable tax free under current tax laws).

If you decide to retire before or after age 65, your pension will be either reduced to reflect early payment or increased for late payment. Under the proposals if you defer taking your pension until after age 65 you will be able to choose when to start taking it up to age 75 regardless of whether you are still in employment with your employer or not.

You can request a retirement quote from Barnett Waddingham, the Plan administrators. You can contact them using the details below:

Email: Adventist@Barnett-Waddingham.co.uk

Telephone: 0333 11 11 222

What happens if I had a right to an unreduced pension from age 62 after 35 years of service?

Some employees are eligible (with the consent of the Executive Committee of the BUC) to take their retirement benefits unreduced from an earlier date than normally allowed. This applies if they reach 35 years of service in the Plan before their 65th birthday.

For eligible employees, who have 35 years of service, this right to take an unreduced pension applies from their 62nd birthday or 35-year service anniversary if later. The proposed changes mean those employees would end service in the Plan on 30 June 2025, which may be before their 35-year service anniversary.

As a result of this, it’s proposed those employees that would have achieved 35 years or more of service before age 65 and been eligible to take an unreduced pension after age 62 but before age 65 will retain the right to take their benefits unreduced from the same date regardless of whether they remain in employment with their employer or not.

By removing the need for those employees eligible for this to actually remain in continuous employment for 35 years, this represents an enhancement to those employees’ current benefits in this area.

What will happen to my ‘suspended obligations’ in the Old Scheme?

Some employees will have built up a pension promise in the ‘Old Scheme’, which are generally referred to as ‘suspended obligations’. Currently, these benefits are brought into the Plan when you retire so your Plan pension and suspended obligations in the Old Scheme are paid to you together from the Plan.

These suspended obligations are also linked to your salary. The proposal is to remove the salary link on these suspended obligations in the Old Scheme in the same way as your Plan pension.

What if I retire in ill-health?

As an employed deferred member, you are currently eligible (with the consent of the Executive Committee of the BUC) to receive an unreduced pension if you were to retire in ill-health (as defined in the Plan’s Rules). At the moment, once members have left service, they are no longer treated as being eligible for an unreduced ill-health pension and so your pension would be reduced to reflect your age if you took ill-health retirement before reaching age 65.

However, the BUC is proposing you’d continue to be treated as being eligible for an unreduced ill-health retirement pension if you were to retire on ill-health grounds after 30 June 2025, regardless of whether you remained in employment with your employer or not.

By removing the need for employees to remain in employment in order to receive an unreduced ill-health pension, this represents an enhancement to those employees’ current benefits in this area.

Will my spouse’s pension be affected by these changes?

Yes. Currently if you die before you retire, a pension would be payable to a spouse or eligible dependant (as set out in the Plan’s Rules). This pension would be a proportion of your pension based on your final pensionable salary at date of death or your 2013 pension with inflationary increases if higher.

The proposal means this death before retirement spouse’s pension will be a proportion of your pension based on (i) your final pensionable salary at 30 June 2025 plus inflationary increases as set out in the Rules (subject to a cap) between 30 June 2025 and your date of death or (ii) your 2013 pension with inflationary increases if higher.

We’d encourage you to discuss the proposed changes with your spouse or other financial dependants so you’re all aware of the potential changes.

As part of this, it’s important you make sure your Expression of Wish form is up to date. To update your form email Adventist@Barnett-Waddingham.co.uk

If the proposal goes ahead, will I still have a cash sum death in service benefit?

Whether or not the proposal goes ahead, you’ll continue to benefit from a death in service life assurance policy benefit which is funded by your employer.

However, if you were to die after your 65th birthday but before starting to receive your Plan pension, currently any lump sum due from the Plan would be reduced by the amount of any death in service lump sum received from the policy above.

The proposal is the reduction would no longer apply. In the event you died after your 65th birthday but before starting to receive your pension you would receive the full lump sum from the Plan plus any additional death in service lump sum paid out by the policy above.

This is an enhancement to your current benefits.

Can I transfer my retirement benefits to another Plan?

Yes. In general, individuals who haven’t started to take retirement benefits from the Plan have a right to transfer a cash equivalent amount of their benefits to an alternative pension arrangement (which meets certain legal requirements). Before making any decision, you should speak to a regulated financial adviser. 

If the value of your benefits in the Plan are more than £30,000 you must by law receive regulated financial advice before you are able to take a cash equivalent transfer value in relation to your Plan benefits.

It’s recommended you consider taking regulated financial advice if you need further information relating to your particular circumstances.  See ‘Where can I get financial advice?’ in the section below. 

What will happen to any Additional Voluntary Contributions (AVCs) in the Plan?

Your AVCs will be preserved and managed by the Plan Trustees as they are now, until you choose to retire.

Other useful information

Where can I get more information?

We are committed to ensuring you have access to the information you need to consider the proposed changes. You can get more information as follows:

• Updates to this Q&A document - you can find out more about the proposed changes and answers to frequently asked questions. It will be kept updated throughout the Consultation Process and updates can be found online at [add BUC website details]

• Member presentations – where you can hear more about the proposed changes. A series of presentations will be held between 22 January and 4 February 2025 and you can sign up for these on the BUC website at [Jacques to confirm details]

• Your questions – please send your questions to secretariat@adventist.uk  Your email will either be answered directly and/or will form part of a future update to the Q&A document, particularly if the answer would be useful to your colleagues.

It’s important to know, neither the Trustees, the BUC nor your employer can provide you with financial advice.

If you’ve got any questions about the Plan or your current Plan benefits, please contact the Plan administrators, Barnett Waddingham, on:

Email: Adventist@Barnett-Waddingham.co.uk

Telephone: 0333 11 11 222

The Plan administrators will not be able to answer any questions about the Consultation Process or the impact of the proposed changes on your benefits – you should direct these questions to the BUC.

If you’ve got any questions about your pension in the DC Scheme or want to find out more about your options then you can refer to your latest pension statement or find out more from Legal & General using the contact details below:

https://www.legalandgeneral.com/contact-us/pension-savings/

Telephone: 0345 678 0020

Neither the Plan Trustees nor Barnett Waddingham, the Plan administrators, are involved with the DC Scheme and will not be able to provide you with any information about it – please use the contact details above for questions about the DC Scheme.

Where can I get financial advice?

This document does not constitute financial advice.  The BUC and the Plan Trustees can’t give you with financial advice. If you think you need this, you should contact a regulated financial adviser. 

If you don’t have a financial adviser, you can find one by visiting: www.moneyhelper.org.uk/en/getting-help-and-advice/financial-advisers/choosing-a-financial-adviser. You’ll need to cover any costs associated with this service.

In addition, Pension Wise (part of MoneyHelper) offers free independent information and guidance on DC pension issues and can be contacted as follows:

Telephone: 0800 011 3797

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise

What’s the role of the Pensions Regulator?

The Pensions Regulator is the body that regulates work-based pension schemes like the Plan. The Pensions Regulator has no formal role in the Consultation Process but it can take action if employers don’t comply with the law when proposing changes like this.

While every effort has been taken to ensure the Consultation Process is run in compliance with the law, you can contact the Pensions Regulator if you have any concerns about it.

The Pensions Regulator’s contact details can be found on their website here:

https://www.thepensionsregulator.gov.uk/en/contact-us

What are the current pension tax allowances?

Annual Allowance

This is the limit on the amount that you can save into tax registered pension arrangements each year while still receiving tax relief. 

It can be reduced for high earners, called the Tapered Annual Allowance.

For information on the current Annual Allowance limits please visit www.gov.uk/tax-on-your-private-pension/annual-allowance  

Money Purchase Annual Allowance

The Money Purchase Annual Allowance applies if you take benefits ‘flexibly’ from your DC pension account or another pension arrangement (for further information see www.gov.uk/tax-on-your-private-pension/annual-allowance). This limit restricts the level of payments that can be made by you and your employer to pension arrangements like the Plan and your DC pension with L&G to a lower limit.

If you do trigger the Money Purchase Annual Allowance, the option to use unused allowances from previous years is removed.

Irrespective of the Annual Allowance, your own payments and where relevant those from the Government (tax relief) in each tax year will normally be limited to 100% of your net relevant earnings, or £3,600 (whichever is greater).

Changes to the Lifetime Allowance

From 6 April 2024, there has no longer been a limit on the amount of tax-efficient pension savings that you can build up (previously the Lifetime Allowance applied). Instead, cash sums will be assessed against new allowances, with any excess subject to the recipient’s marginal rate of income tax (i.e. the highest rate of tax that applies to you).  

There are two main allowances:

1. The Lump Sum Allowance of £268,275, is the new limit on the tax-free cash sums you can normally receive in life.

2. The Lump Sum and Death Benefit Allowance, of £1,073,100, is the new limit on the total of the tax-free cash sums that can be paid in life and received by your beneficiaries if you die before age 75.

Exceptions, protections and transitional arrangements may apply:

• Exceptions – some cash sums don’t use up the allowances, e.g. small cash lump sums.

• Protections – if you have Lifetime Allowance protection and/or lump sum protection, you’ll retain your right to any higher protected entitlements.

• Transitional arrangements – if you used up part of the Lifetime Allowance, your new allowances will be reduced.

For more information on the new allowances, visit www.gov.uk/tax-on-your-private-pension

Accuracy of this information

If there is any difference between the benefits set out in this document and the Rules, then it’s the Rules that are correct. Nothing we have written in this document can give you a legal right to a benefit that doesn’t exist in the Rules.