SPPS Scheme Guide

Welcome to ‘A Guide to the Scottish Parliamentary Pension Scheme (SPPS)’. It provides a straightforward guide to the main provisions of the scheme but does not cover every aspect. Full details of the scheme rules are covered under the Scottish Parliamentary Pensions Act 2009. The current scheme rules came into force from 1 September 2009 and replaced the original scheme rules which were covered under The Scotland Act 1998 (Transitory and Transitional Provisions) (Scottish Parliamentary Pension Scheme) Order 1999. Nothing in this guide can override the regulations and the legislation, which will prevail in the event of any unintentional difference.

I hope you find the guide both useful and informative. If you have any feedback to give on the guide or questions in relation to the scheme rules, the Fund Trustees would be happy to hear from you via the Scottish Parliament Human Resources Office who provide a secretariat service on behalf of the Fund Trustees.

Pauline McNeil MSP

Fund Trustee (Chair)

The SPPS provides benefits for Members of the Scottish Parliament (MSPs) and office-holders (including the Lord Advocate and the Solicitor General for Scotland). It also provides benefits for surviving partners and children.

Contributions are paid into the Scottish Parliamentary Contributory Pension Fund, which has been established under the scheme, with investment managed by an external Fund Manager.

A board of trustees is responsible for managing and administering the fund in accordance with the scheme rules. The current board of trustees elected by the Parliament are:

Pauline McNeil MSP (chair)

Gordon MacDonald MSP

Murdo Fraser MSP

Mark Ballard

The Scottish Parliament Human Resources Office provide secretariat support to the Fund Trustees. Any enquiries for the Fund Trustees should be routed through the Human Resources Office in the first instance. Please send your enquiry to The Scottish Parliament, Human Resources Office, Edinburgh, EH99 1SP, or phone on 0131 348 6500 or by e-mail at humanresources@parliament.scot.

The Scottish Public Pensions Agency (SPPA) provides a pension administration service on behalf of the Fund Trustees. Enquiries and information about your pension entitlement and the pension scheme rules in general can be obtained by writing to the SPPA at 7 Tweedside Park, Tweedbank, Galashiels, TD1 3TE, phoning 01896 893090 or by contacting us. Please note that whilst SPPA can provide information about your pension entitlement and the scheme rules they are unable to provide financial advice.

Your membership to the scheme is automatic following your election/re-election as an MSP or appointment as an office-holder or both. The maximum age for a participating scheme member is age 74. On reaching age 75 your pension contributions will cease. Your pension will be frozen in that you will not accrue any further reckonable service and your pension will become payable only when you cease to be either an MSP or office-holder. Please see section "Commutation into Lump Sum" for other rights in relation to a participating member approaching age 75.

Action on Joining

On joining the scheme there are a number of issues you should consider. For instance, you may wish to transfer into the scheme any pensionable service you have accrued in the scheme of a former employer or in a personal pension plan. You may wish to increase your pension provision by paying additional contributions to purchase added years. Further details can be found later in this guide.

One matter, which should be of immediate concern, is that of nominating the recipients of the death in service lump sum payable in the event of your death. A nomination form can be found at Appendix 1.

The higher rate scheme member contribution, currently 11% of your salary, is the default rate for the scheme. If however you wish to pay the lower rate scheme member contribution, currently 6% of your salary, you must give written notice to the Fund Trustees within three months of being elected/re-elected as an MSP or appointed as an office-holder.

Opting Out of the Scheme

You can opt out of the scheme at any time by giving written notice to the Fund Trustees. If you opt out of the scheme within three months of being elected/re-elected as an MSP or appointed as an office-holder the effect of your decision will be backdated to the date of your election as an MSP or appointment as an office-holder. Any pension contributions deducted from your salary during the opting out period will be refunded to you. If you decide to opt out of the scheme at a later date and have accrued more than three months service your pension will be preserved until age 65.

If you wish to opt out of the scheme please complete the form at Appendix 2 and forward it to the Scottish Parliament Human Resources Office.

Opting Into the Scheme

If you wish to re-join the scheme you may do so under certain circumstances.

MSP opt-in

If you have opted-out you may re-join the scheme as from the date you are subsequently re-elected as an MSP by applying in writing to the Fund Trustees, within three months from the date of your re-election. You must also pay all pension contributions, backdated to the date of your re-election, payable to the Fund within 28 days of being notified of the amount due to the Fund.

Office-holder opt-in

If you have opted-out you may re-join the scheme as from the date you are subsequently appointed as an office-holder by applying in writing to the Fund Trustees, within three months from the date of your election. You must also pay all pension contributions, backdated to the date of your appointment, payable to the Fund within 28 days of being notified of the amount due to the Fund.

The higher rate scheme member contribution is 11% of your salary and the lower rate scheme member contribution is 6% of your salary. The higher rate scheme member contribution is the default rate for the scheme. If you wish to pay the lower rate scheme member contribution (or vice versa) you must give written notice to the Fund Trustees with three months of being elected/re-elected as an MSP or being appointed as an office-holder. If you reach the maximum permitted pension allowable under the scheme of 2/3rds your final salary before age 65 your contributions to the scheme would cease.

The Scottish Consolidated Fund contributes to the scheme at a rate recommended from time to time by the scheme actuary.

Please note that all pension contributions are now subject to the Annual Allowance and the Lifetime Allowance, as described below.

Annual Allowance (AA)

This is the amount of benefits you are allowed to accrue in a registered pension scheme each tax year before you are required to pay tax. If you accrue benefits in excess of this amount, you will be subject to additional tax through your annual tax return. The budget of 8 July 2015 introduced a number of changes to AA. The most important of these was a re-alignment of the reporting years for all pension schemes to the tax year. As from 6 April 2016 all pensions schemes have to report annual allowance in line with the tax year 6 April to 5 April. To allow schemes to do this without adversely affecting their members HM Treasury has altered the rules regarding AA for 2015/16 only. The 8 July 2015 budget also announced the introduction of tapering from 6 April 2016. This is a reduction of the annual allowance received by an individual of £1 for every £2 of adjusted earnings in excess of £150,000.00. Further information about AA can be found here.

The Lifetime Allowance (LTA)

The LTA is a limit on the amount of tax-relieved pension saving that you can have. So, while there is no limit to the size of your pension, you may pay extra tax if it is worth more than the LTA. Treasury has announced that from 6 April 2016 the LTA will reduce to £1 million.

It is important that you remember the LTA value is the total value of all your pension savings – whether in occupational or personal pension schemes. Money purchase pensions such as personal pensions or Additional Voluntary Contributions have a value associated with them, the value of these pensions is their fund value.

The SPPS pays out a set amount of pension upon retirement and can be valued by multiplying the pension by 20. The LTA value also applies to preserved pensions from previous employments as well as to any pension being built up in current employment. If the total of all your pension values exceeds the LTA then you will be liable for payment of tax on the excess. Further information can be obtained from HMRC or an independent financial adviser.

Normal Age Retirement

Your retirement benefits will be payable from age 65 as long as you are no longer an MSP or office-holder. You require a minimum of three months membership to qualify for a pension. If you pay the higher rate scheme member contribution your pension accrues at the rate of 1/40th of final salary for each year (pro rata for part of a year) of reckonable service. For the lower rate scheme member contribution your pension accrues at the rate of 1/50th of final salary for each year (pro rata for part of a year) of reckonable service.

Your pension is payable for life unless you become an MSP or office-holder at a later date in which case your pension will be suspended until you cease to be an MSP and or office-holder. Examples of typical age retirement calculations are given below:

Ill-health Retirement

Subject to medical evidence and meeting the requirements of the scheme rules, the Fund Trustees may authorise an ill-health retirement pension at any age. If your health condition prevents you from doing any gainful work a serious ill-health pension, with enhanced service to age 65, would be payable. If your health condition prevents you from adequately performing the duties of an MSP/office-holder but does not prevent you from doing other gainful work an ordinary ill-health pension, with no enhanced service to age 65, would be payable.

The Fund Trustees may carry out, at any time, a review of your eligibility for an ill-health pension until you reach age 65. If, following a review, the Fund Trustees are satisfied that you are no longer prevented from doing gainful work by reason of your health, the Fund Trustees can either determine that you are no longer entitled to an ill-health pension or where you are entitled to a serious ill-health pension, that you should be entitled to an ordinary ill-health pension. In the latter case, the Fund Trustees would have to remain satisfied that you would not be able to perform the duties of an MSP or an office-holder.

The Fund trustees may also authorise the payment of an ill-health retirement grant if you meet the provisions set out under Schedule 2 of the Scottish Parliamentary Pensions Act 2009. Examples of ill-health pension calculations are shown below:

Early Retirement

Provided you are no longer an MSP or office holder, you have attained the age of 55 and you have more than three months reckonable service (excluding any service credit for transfers in or added years), you may apply to the Fund Trustees to have your pension paid early. Where your pension is paid early it will be reduced by 4% for each year you leave early before age 65.

Your pension is payable for life unless you become an MSP or office-holder at a later date in which case your pension will be suspended until you cease to be an MSP and or office-holder.

Retirement Lump Sum

You may commute part of your pension in exchange for a retirement lump sum. The maximum commutation for the scheme is 25% of your annual pension. The survivor’s pension is not affected by commutation.

If you are approaching aged 75 you may apply to the Fund Trustees to receive your retirement lump sum. Your application must be made prior to your 75th birthday so that the retirement lump sum can be paid the day prior to your 75th birthday. If you continue to serve as an MSP and or office-holder your pension will be suspended until you cease to be an MSP or office-holder. An example of a maximum commutation calculation is shown below:

Surviving partner

If you die your partner will receive a pension. This will be based on five eighths of either the pension you would have expected to receive at age 65, or your deferred or retirement pension. A surviving partner’s pension is payable for life.

A partner may be a spouse, civil partner or an unmarried partner. For an unmarried partner to qualify for a partner’s pension the Fund Trustees must also be satisfied based on the evidence they have received that:

• You had lived together with your unmarried partner as if husband and wife or civil partners for a period of at least two years before your death;
• You and your unmarried partner were in an exclusive relationship and neither you nor your unmarried partner had lived with any other person in such a relationship or with a spouse or civil partner during the two year period;
• During the two year period your unmarried partner was financially dependent on you or you were mutually financially dependent; and
• Immediately before your death you and your unmarried partner must not have been prevented by law from marrying or becoming civil partners. As such both you and your unmarried partner must not have been the spouse or civil partner of any person and neither of you should have been prevented by law from marrying or becoming civil partners because of your age, mental capacity, relationship or other legal restriction.

Although the mandatory requirement for a completed nomination form has been withdrawn a form will still be available for anyone who would like to inform SPPA of their partnership details. This will only be used for administrative purposes but may provide useful additional information in the event of a claim being made. As mentioned above any entitlement to a nominated partner benefit will be based on the underlying conditions being met.

Surviving children

If you die and you leave one or more eligible children, a pension is payable. Where there is one eligible child the pension is a sum equal to one quarter of either the pension you would have expected to receive at age 65, or your deferred or retirement pension. Where there is more than one child, the pension will be three sixteenths for each child not exceeding two. An eligible child is a child from your marriage or adopted or wholly or mainly dependent on you who is.

• aged 17 or under; or
• aged over 17 but under 23 and financially dependent on you at the time of your death; or
• dependent on you at the time of your death because of physical or mental impairment.

An example of the pension payable to a surviving partner and one dependent child in the event of death in retirement and service is shown below:

Death benefit lump sum

If you are a participating member and die in service the Fund Trustees may grant a death in service lump sum payment. The lump sum payable to your nominee(s) will be the greater of four years’ final salary or your accumulated contributions in the scheme, plus compound interest.

If you wish to nominate a person(s) to receive this lump sum, please ensure that you complete and return the nomination form to the Scottish Public Pensions Agency.

As the amount involved can be sizeable, the importance of making a nomination and keeping it up to date cannot be overstated.

The advantage of making a nomination is that the lump sum can be paid to your nominee(s) without having to pass the money through your estate. The Fund Trustees will normally honour the nomination(s), but they will treat a nomination as not being in force at the time of your death if the nominated person subsequently ceased to be your partner, or if the Fund Trustees are of the opinion that payment of the lump sum is not reasonably practicable.

If you leave the scheme, a refund of contributions on written request to the Fund Trustees will be paid, provided your total reckonable service is less than three months. If a refund is taken, any entitlement under the scheme is forfeited.

Transfer in

If you have pensionable service in the scheme of a former employer, or in a personal pension plan, you can transfer such service into the scheme by means of a transfer value payment from the previous scheme. The size of the transfer value payment will determine the length of service to be credited in the scheme. The scheme allows a transfer in at any time. However, you are advised to check with your former scheme at an early stage to determine whether there are any time limits on transfer requests. A form to request transfer in of pension benefits is at Appendix 3.

Transfer out

If you cease to be an MSP or office-holder or if you have opted out, you can transfer your service into another pension scheme registered with the HMRC by means of a cash equivalent transfer value. In most circumstances this must be requested before you reach age 64 or within 6 months after leaving the scheme if you are still a member at that age.

If you wish to transfer out please contact the Scottish Public Pensions Agency for further information.

If your prospective pension entitlement is less than two thirds of your final salary you may, subject to certain conditions, purchase added years of service for pension purposes, either by periodical contributions or by a lump sum payment.

Any added years purchased will count when determining benefits from the scheme. Added years can be purchased up to the age of 74, either by paying periodical contributions, normally for four years, or by a single lump sum. Conditions of eligibility include being a participating member of the scheme and being in good health. Further information about buying added years, including the cost, is available on request by writing to the Scottish Public Pensions Agency.

The amount of contributions paid cannot exceed 20% of your salary, in any tax year when aggregated with the basic contributions to the scheme.

If you purchase added years by periodical contributions and you die, or cease to be a participating member on serious ill-health grounds, no further contributions will be payable and the added years applied for will be credited in full. If you cease to be an MSP or office-holder in any other circumstances before fulfilling the added years’ contract you will receive a pro rata credit. If you subsequently re-join the scheme and you wish to resume contributions then you must apply in writing to the Fund Trustees within three months of re-joining.

Payment for the purchase of added years by lump sum must be made within six months of the acceptance of your application. If payment has not been made within that period your application will become void.

Pensions in payment are increased annually in line with the UK Government legislation.

Pension Sharing was introduced in December 2000. As part of the divorce or dissolution process the assets of a marriage or civil partnership are identified and agreement is reached about how these assets or their cash value, are to be shared. Pension rights accrued by either, or both parties, may now be shared by a pension sharing order or under a joint minute of agreement.

Further information can be obtained from the Scottish Public Pensions Agency and if you are in proceedings in which a pension sharing order or agreement is in contemplation, please contact the Scottish Public Pensions Agency at the earliest opportunity.

If you cease to be an MSP or office-holder, and receive a pension, and subsequently become a candidate or re-elected as an MSP or appointed as an office-holder, your pension will be affected. If you require further information about this, please contact SPPA.

If we have made a mistake, we will apologise and put things rights as quickly as possible.

If you are not satisfied, we have a disputes procedure, which complies with pension legislation and Citizen's Charter guidelines. This is a two-stage process, the first of which asks you to write to the Fund Trustees who will try to resolve your complaint and let you have a response within three weeks. If you are still not satisfied, you may wish to consider discussing a potential appeal with a member of the Pensions Ombudsman’s Early Resolution Team. They can also support you through the process, and you can reach their helpline at: Phone: 0800 917 4487 (selecting the relevant option)
Email: helpline@pensions-ombudsman.org.uk

Finally you may take your case to the Pensions Ombudsman or the Scottish Public Services Ombudsman (SPSO). 

Full details of this internal dispute resolution procedure can be found in our complaints procedure, or via the Scottish Parliament Human Resources Office.