What is the impact of life events?
There are some events that can occur during scheme membership that may impact on pension benefits.
Parental Leave
This covers maternity, paternity and adoption leave.
The benefits from a DB scheme are based on the member’s salary before the leave begins and contributions continue to be paid.
The member’s contributions will be based on their actual salary received during parental leave whereas the employer contributions are based on the salary before leave commences.
If a member extends parental leave from the statutory period that extra period is classed as unpaid leave and will not count towards pensionable service. Membership before and after the period of unpaid leave must be treated as continuous service. A member can make up the deficit for the unpaid period when they return to work by paying additional voluntary contributions.
Secondment Overseas
If a member is seconded abroad to work for an overseas resident employer they can remain a member of the UK pension scheme irrespective of how long they remain abroad.
If the member transfers abroad permanently and loses UK taxpayer status, they cannot remain a member of the UK pension scheme.
Sabbatical
If a member has an extended period of leave, the impact on their pension benefits depends on whether or not they continue to receive pay.
If their pay continues then contributions continue to be paid and benefits continue to accrue.
If they do not receive any pay for the sabbatical then the period is classed as a break in service and no pension benefits are earned.
The member should check with the employer if life cover remains in place during the sabbatical.
Change in Working Hours
Members may change their working pattern and move from full time to part time or vice versa, they may also do this a number of times during their scheme membership. For members of defined Benefit schemes the benefits are calculated using pensionable service so this has to be adjusted by the change in working hours.
Example:
A member works full time and joins the scheme on 1 October 1988 with a retirement date of 30 September 2020.
From 1 July 2013 the member reduces their hours from 5 days to 3 days per week.
Assuming the member remains in the scheme until retirement date the pensionable service will reduce from:
to:
| Full Time | Part Time |
| 30/06/2013 | 30/09/2020 |
| 01/10/1988 | 01/07/2013 |
| 24 yrs 9 mths | 7 yrs 3 mths x 3/5 = 4 yrs 4 mths |
Bankruptcy
If a member becomes bankrupt they will be assigned a trustee in bankruptcy or official receiver who will take charge of their financial affairs. The member has a duty to provide information about their pension scheme benefits.
After 29 May 2000
If the member has a bankruptcy order made on or after this date then all schemes approved by HMRC remain outside the bankrupt’s estate and cannot be claimed by the trustee in bankruptcy.
Before 29 May 2000
If a member was made bankrupt before this date then the trustee in bankruptcy may claim all or part of the pension whether it is due now or in the future.
They cannot claim benefits from an Occupational Pension Scheme if it has a forfeiture clause which means that when a member is made bankrupt they automatically lose their rights to pension benefits from the scheme. If this clause does not exist the trustee in bankruptcy may claim those rights.
In the case of a Personal Pension Plan the trustee in bankruptcy can claim the pension rights from the date of the bankruptcy order regardless of a forfeiture clause being in place.
The trustee in bankruptcy will tell the member which part, if any, is being claimed as an asset.
Regardless of when a member is made bankrupt the trustee in bankruptcy cannot claim any part of their State Pension or SERPS/S2P pension.
The member can obtain advice from: "http://www.insolvency.gov.uk/"
