Retirement may seem a long way off. Although, you are no longer a contributing member of the CARE section of the AA Pension Scheme (‘the Scheme’), planning how to provide for the future, for you and your family still involves important decisions for you to make.
These pages describe the benefits offered to members who previously contributed to the CARE section of the Scheme employed in the UK.
Your benefits from the CARE section of the AA Pension Scheme (‘the Scheme’) are a valuable part of your employment rewards package and represent a real commitment by the AA to help you shape your financial future.
It offers important benefits for you and your family, including an income in retirement based on your earnings whilst you were an Active member of the Scheme.
This is a summary of what CARE has to offer. It outlines the main benefits and explains how it works. Every effort has been made to ensure the accuracy; however, it is not a legal document. Full details are set out in the Trust Deed and Rules, the legal document that will always overrule this document should any inconsistency or question of interpretation arise. A copy can be obtained from the AA Pensions team.
Some information referred to may be subject to change (i.e., contribution rates or taxation limits etc.). To see the most up to date information you should also refer to the ‘Current rates’ page. If there are any terms used in this booklet that you do not understand, please refer to the Glossary section where a brief definition of the key terms regularly used can be found.
When you were an active member of CARE, you built up a basic amount of retirement income each year based on your pensionable pay in that year. This was then revalued each year until you retired. The total amount of accumulated annual income built up over the years in CARE is then paid to you on a regular monthly basis for the remainder of your lifetime.
This section provides benefits for you and your dependents both before and after your retirement. The benefits you built up prior to 1 July 2017 whilst you were a contributing member of this section of the Scheme are covered in more detail.
Membership of the Scheme will not affect your entitlement to the Basic State Pension, which is payable from your State Pension Age.
The Trustee is responsible for running this section of the Scheme in accordance with the Trust Deed and Rules. The names of the Trustee Directors are available in the latest Report and Accounts.
Aon deals with the day-to-day administration of all sections of the Scheme.
The CARE section closed to new entrants with effect from 1 October 2016 and to future accrual on the 31 March 2020. This information is therefore only relevant to those who were already members of the section when the CARE section closed to new employees joining this section of the Scheme.
If you were a contributing member to any other section of the AA Pension Scheme prior to 1 July 2017, you were automatically transferred into this section of the Scheme with effect from 1 July 2017 unless you opted to leave the Scheme.
Since 31 March 2020 members have not been required to make any contributions to this section of the Scheme. The Company is required to meet the cost of any benefits provided from this section of the Scheme (in excess of the contributions members and the Company previously paid to the Scheme). Company contributions are determined by the Trustee and the Company after considering advice from the Scheme Actuary and are reviewed regularly.
Some members may have previously transferred benefits into the Scheme and in return were granted an additional period of pensionable employment. However, no further transfer payments can be accepted into the Scheme.
As a deferred member you will have a deferred pension in the Scheme that will become payable from your Normal Retirement Date - age 65 (or 62 for specific members).
Your deferred pension is payable from your Normal Retirement Date.
You will receive increases to your deferred pension to help protect it against inflation.
The Guaranteed Minimum Pension (GMP) included in your deferred pension will be increased at a rate set by the Government.
Your pension (above your GMP) will increase over the period until your Normal Retirement Date broadly in line with inflation (as measured by the Consumer Price Index) up to a maximum of 5% per year for your pension built up prior to 6 April 2009 and up to a maximum of 2.5% per year for your pension built up after this date.
Precise details of your deferred pension entitlement will have been provided to you when you left this section of the Scheme.
Your pension is payable for your lifetime by monthly instalments in advance and will be paid directly into your bank or building society account.
You may, if the Trustee agrees, choose to exchange up to 25% of the ‘value’ of your pension benefits for tax-free cash when you take your pension. This is often referred to as “commutation”.
If you have paid Additional Voluntary Contributions (AVCs), then you may also take up to 25% of the value of your accumulated AVC fund as a cash lump sum.
The Trustee, after considering advice from the Actuary, will decide the amount of pension you will have to give up in exchange for a cash sum when you commence your pension; this will depend on your age. The terms for exchanging pension income for cash may be reviewed and altered by the Trustee from time to time.
Although any cash sum taken will reduce your pension, it will not affect any spouse’s, civil partner’s, or dependant’s pension payable on your death.
You may request to transfer the value of your deferred pension and any AVCs to another registered pension scheme.
The value of your deferred pension (the cash equivalent transfer value (CETV)) is calculated as the amount which needs to be invested in order to provide your future pension. It takes account of the number of years before retirement and financial conditions at the date of payment of the CETV.
You are entitled to request a transfer quotation once a year free of charge which outlines the transfer value, at a specified date. If you do wish to consider transferring, please seek independent financial advice to make sure it is in your best interest to do so. Additional requests for a CETV quotation within the same 12-month period will be chargeable.
The normal retirement age is 65.
If you had reached your Minimum Pension Age (age 55) and was still in Service, you could have requested agreement from the Company, that the Trustee pay part of your CARE pension entitlement to you whilst you remained in Service.
To apply for flexible retirement, you must notify the Company no later than two months before your chosen flexible retirement date. If approved, the terms of your flexible retirement must then be agreed in writing between the Company, Trustee, and yourself.
If you were a contributing member to any other section of the AA Pension Scheme prior to 1 July 2017 and were automatically transferred into the CARE section with effect from 1 July 2017 you may apply to receive your benefits you built up prior to 1 July 2017 and continue to build up further CARE benefits whilst employed by the Company.
To apply for partial retirement, you must notify the Company no later than two months before your chosen partial retirement date. If approved, the terms of your partial retirement must then be agreed in writing between the Company, Trustee, and yourself.
A Member may choose to start receiving their pension past their Normal Retirement Date of 65. If the Member’s pension starts after Normal Retirement Date, it will be increased for late payment on a basis determined by the Trustee after considering advice from the Actuary. The Trustee must be reasonably satisfied that the benefits (including death benefits) for a Member who chooses a late pension are at least equal in value to the benefits that would otherwise have been provided for the Member under the Scheme retirement after age 65 is possible. which your retirement income is expected to be paid.
As a member with an entitlement to a deferred pension, it is possible to commence payment of your pension before your Normal Retirement Date.
The earliest date at which your pension can commence is age 55 (this increases to age 57 from 6th April 2028, in line with current legislation).
Your deferred pension will however be reduced due to the fact that it will be paid for a longer period. The rate of reduction is decided by the Trustee after considering advice from the Actuary.
With the agreement of the Company and Trustee after considering medical evidence, your pension (as described above) may be paid to you before age 55 if you retire on the grounds of ill-health (incapacity – detailed later).
When you retire you may choose to exchange some of your accumulated retirement income for a cash lump sum, including if you retired due to ill-health. Some or all of this cash lump sum may be paid tax free.
The amount of accumulated retirement income you will have to give up in exchange for a cash lump sum will be decided by the Trustee and the Company based on figures provided by the Scheme Actuary and may be altered from time to time.
Your retirement income will be paid monthly. Income tax will be deducted using the Pay As You Earn (PAYE) system, where appropriate and payments will be paid by direct credit into your bank or building society account. Payslips will be available to view online in the secure pensioners area of the Scheme website.
Once in payment your CARE pension will be reviewed annually, and you may be entitled to receive an increase as follows:
* With effect from 1 April 2018 the measure for price inflation is the Consumer Prices Index (‘CPI’) rather than the Retail Prices Index (‘RPI’) which was the measure applicable until 31 March 2018.
For pension increases relating to benefits accrued in this Scheme prior to becoming a CARE Scheme member, please refer to the relevant Explanatory Booklet for the Scheme to which you were previously a member.
If you die after taking your pension, the following benefits will be paid:
Pension Guarantee
Your pension, excluding any early retirement on redundancy supplement or serious incapacity supplement, is guaranteed for five years, so if you die within five years of commencement of your pension, the remainder of the five years’ pension payments is paid (disregarding any future pension increases). The Trustee has discretion as to whom the payment is made;
Spouse’s or dependant’s pension
Your spouse, civil partner or (if they meet the conditions in the Rules and the Trustee agrees) dependant will receive a pension equal to half the pension payable to you at the date of your death (excluding any early retirement on redundancy supplement or serious incapacity supplement) but as if you did not exchange any of your pension for a cash sum or level pension option; and
A child’s pension
A pension is paid to each of your children (up to a maximum of four). Each pension is equal to one quarter of the spouse’s, civil partner’s or dependant’s pension. Pensions will be paid to children up to the age of 18 and may be paid at the Trustee’s discretion to children up to the age of 23 if they are still in full time education.
Once in payment your pension will be increased each year on 1 April (or such other date as the Trustee and the Company agree) as follows:
For pension benefits built up to 30 June 2010:
Your pension (above your GMP) is guaranteed to increase each year in line with inflation (as measured by the Retail Price Index, over the 12 months ending on the previous 30 September) up to a maximum of 5%.
For pension benefits built up on or after 1 July 2010:
Your pension (above your GMP) is guaranteed to increase each year in line with inflation (as measured by the Retail Price Index, over the 12 months ending on the previous 30 September) up to a maximum of 2.5%.
The GMP element of your pension will be subject to increases, the exact basis differs depending upon when you became a deferred member of the section, when your pension commenced and your age.
Pensions in payment are reviewed each year by the Company, which may award additional discretionary increases to help keep pace with inflation.
CARE not only helped you save for retirement, but it also makes important financial provisions for your family.
In the event of your death and, provided you joined CARE within 12 months of starting work with the AA, the following benefits may be paid:
* subject to certain criteria being met.
A lump sum payment of the greater of four times your pensionable pay received in the preceding year (12 months to previous 31 March) or, four times your annual basic rate of pay (excluding overtime etc.) at the date of your death.
If you have paid Additional Voluntary Contributions (AVCs), any AVC account balances will also be paid as a cash lump sum on your death.
Your spouse’s or civil partner’s pension will be based on your prospective pension calculated as follows:
Pensions are paid for up to four children under age 18. Each pension is one quarter of the spouse’s pension. Total children’s pensions of up to the amount of the spouse’s pension can be paid.
No child can receive more than 25% of the spouse’s pension. If no spouse’s, civil partners, or adult dependant’s pension is payable, the child’s pension will be doubled.
A child will qualify for a pension on your death if he/she is:
A child over age 18 may qualify for a pension if he or she is incapable of self-support by reason of bodily or mental injury or disability, or in the opinion of the Trustee, continuing in full time education or vocational training (including any period which the Trustee considers to be a short break in the child’s education).
The Trustee has discretion to exclude any person over age 21 whom it considers does not meet the criteria from receiving a child’s pension.
If no spouse’s, civil partners, or adult dependant’s pension is payable, the child’s pension will be doubled.
Pensions may be paid at the discretion of the Trustee to children up to the age of 23 if they are still in full time education.
If you are a Late joiner, the lump sum in respect of life cover, spouse’s and dependant’s benefits will be phased in over a five-year period as shown in the table below:
| Example – phased benefits for late joining only | |||
|---|---|---|---|
| Lump sum | Spouse’s pension | Children’s pension | |
| 1st year after joining | No cover | No benefits | No benefits |
| 2nd | 1 x pensionable pay | 20% of your prospective pension | 10% of your prospective pension |
| 3rd | 2 x pensionable pay | 30% of your prospective pension | 15% of your prospective pension |
| 4th | 3 x pensionable pay | 40% of your prospective pension | 20% of your prospective pension |
| 5th | 4 x pensionable pay | 50% of your prospective pension | 25% of your prospective pension |
For members of the Scheme who reached their State Pension Age prior to April 2016, the State Pension scheme was made up of two main parts:
Provided you have paid the required National Insurance Contributions (NICs) during your working life, you will receive a Basic State Pension. The pension is a fixed amount set by the Government and is increased each year in line with price increases. It is paid from State Pension age.
Further information on the State Pension can be found at www.gov.uk/state-pension.
You cannot opt-out of the Basic State Pension.
The Additional State Pension (previously known as the State Second Pension (S2P)) is an extra amount of money you could get on top of your Basic State Pension if you reached State Pension age before 6 April 2016.
How much you get depends on:
From April 2016, the Government introduced a new flat rate pension. The new State Pension is a regular flat rate payment from the government that you can get if you reach State Pension age on or after 6 April 2016.
The actual amount you get depends on your National Insurance Record.
Further information on the new State Pension can be found at www.gov.uk/new-state-pension
For queries relating to your State benefits, you can contact The Department for Work and Pensions (DWP).
Future Pension Centre
The Pension Service 9
Mail Handling Site A
Wolverhampton
WV98 1LU
Telephone: 0345 3000 168
Website: www.gov.uk/check-state-pension
As mentioned earlier in this booklet, there are a number of valuable tax reliefs available to members of HMRC Registered Pension Schemes. To take advantage of them, schemes must comply with special tax rules. The overview that follows is the Trustee’s understanding of current legislation.
Full details can be found on the HMRC website. It should be remembered that the tax treatment of pension schemes is outside of the AA’s control and is subject to change in the future by the Government.
If you think that you may be affected by HMRC limits then you should seek independent financial advice.
Under tax law, you can pay contributions of up to 100% of your taxable earnings each year (or £3,600 per annum, if greater) into any Registered Pension Scheme.
The Annual Allowance limits the amount of tax privileges on a member’s ‘pension input’ each year. If the value of a member’s pension input exceeds the Annual Allowance, the excess will be subject to a tax charge. ‘Pension input’ includes:
The Annual Allowance for the 2023/2024 tax year is £60,000.
Since April 2014, the Annual Allowance has been set at £60,000 and will continue at this level for most individuals. However, from 6 April 2016, the Annual Allowance was tapered for individuals with taxable income over £200,000. For every £2 over £200,000, the Annual Allowance will be reduced by £1, down to a minimum of £10,000.
If you have pension savings outside of the AA Pension Scheme and have taken advantage of any of the new pension flexibilities, for example income drawdown from a Defined Contribution (DC) pension plan, you will have a reduced Annual Allowance of £10,000 towards any DC pension savings.
The MPAA only applies to contributions to DC arrangements and not defined benefit pension schemes. Your normal contributions to the CARE section are therefore not impacted by the reduction in the Annual Allowance.
From 6 April 2024, the Lifetime Allowance (LTA) which sets the total value of all the pension savings you can build up before having to pay extra tax, is being abolished. The limit of cash, members can take will remain the same.
From 6 April 2023, the LTA charge has been removed, so there will be no additional tax charge from this date. The amount of tax-free lump sum you can take is 25% of your total pension savings up to a maximum of 25% of the standard lifetime allowance. Remember, you need to take account of all pension benefits you build up, not just those in the AA Pension Scheme.
If you think you may be affected, it is a good idea to speak to an independent financial advisor. If you do not have your own adviser, you can find one local to you at www.unbiased.co.uk
You can obtain further information about the Annual Allowance and LTA, including available protections from the HMRC website www.gov.uk/tax-on-your-private-pension
For defined benefit schemes the ‘value’ of the member’s pension is calculated by multiplying the initial annual pension by 20 and adding it to the pension commencement lump sum received. This would be added to the value of any other pension funds you have to determine whether the Lifetime Allowance has been reached. In practice it is expected that few members of the CARE section will reach the Lifetime Allowance, but you should take independent financial advice if you believe that you may be affected by it.
In practice it is expected that few members of this section will reach the LTA, but you should take independent financial advice if you believe that you may be affected by it.
Your entitlement to CARE benefits may be withdrawn or reduced if you are party to a fraudulent, negligent, or criminal act which results in financial loss to the Company.
Your benefits are strictly personal and cannot be assigned to any other person or used as security for a loan including a mortgage.
In line with legal requirements, the Trust Deed and Rules contain provisions to amend or close CARE in specific circumstances.
The Trustee will hold personal data provided by you (and, where appropriate, by third parties such as the Company) for the purpose of calculating and providing your benefits and your dependants’ benefits under the Scheme.
The Trustee needs to use your personal data:
The Trustee may share your personal data with others (within the United Kingdom or in any other country) where it thinks it is necessary or desirable to do so in connection with the administration of the Scheme. In particular the Trustee may make the information available to its professional advisers, to the Company, to the Scheme Administrator and to any other persons who may become responsible for providing benefits. The Trustee has measures in place to protect the security of your personal data and keep it confidential.
You can find out more about how the Trustee will use your data by reading the Trustee’s privacy notice. If you would like a copy of the privacy notice, please request one from the AA Pensions team.
If you have a complaint relating to CARE you should in the first instance contact the Scheme’s Pension Department about any concerns — it may be that a concern can be resolved informally. If the matter cannot be resolved informally, the Scheme has a formal Internal Disputes Resolution Procedure (IDRP), and a full copy is available to view in the Document library of the Scheme website.
The IDRP will be used to resolve any dispute if you have a serious problem that the Pension Department cannot resolve, or you are unhappy with the decision reached. To begin the IDRP your complaint must be sent in writing and addressed to the Chairman of the Administration Committee.
Please refer to the Document library of the Scheme website where you can download a copy of the Scheme’s Formal Internal Disputes Resolution Procedure which also includes the STAGE 1 Dispute Form (Initial Complaint).
You will then receive a written decision and an explanation, where possible within four months of your written complaint being received.
If you are still dissatisfied, you have the right to appeal to the Trustee.
At any time during the disputes procedure, you may refer the complaint to the Pensions Ombudsman.
The Money Helper offers unbiased information and advice on a range of topics and has available a range of tools for you to use in your retirement planning.
Website: www.moneyhelper.org.uk/en
Pensions Helpline: 0800 011 3797
From overseas: +44 20 7932 5780
If you have a complaint or dispute in relation to an occupational pension scheme, you should contact the Pensions Ombudsman, who can investigate this matter on your behalf free of charge. The Pensions Ombudsman will expect you to have tried to resolve your complaint or dispute through the Scheme’s IDRP first.
You can contact the Pensions Ombudsman by writing to:
The Pensions Ombudsman
10 South Colonnade
Canary Wharf
E14 4PU
Telephone: 0800 917 4487
Website: www.pensions-ombudsman.org.uk
Email: enquiries@pensions-ombudsman.org.uk
TPR is responsible for regulating UK pension arrangements. It has the power to intervene in the running of a pension scheme where trustees, employers or professional advisers have failed in their duties. TPR can be contacted at:
The Pensions Regulator
Napier House
Trafalgar Place
Brighton
East Sussex
BN1 4DW
Telephone: 0345 600 0707
Website: www.thepensionsregulator.gov.uk
The Pension Tracing Service holds details of over 200,000 occupational and personal pension schemes. If you need help to trace pension benefits from previous employment, for example if you leave and lose touch with your employer, you can ask for free help by contacting:
Pension Tracing Service
The Pension Service 9
Mail Handling Site A
Wolverhampton
WV98 1LU
Telephone: 0345 6002 537
Website: www.gov.uk/find-pension-contact-details
CARE is a section of the AA Pension Scheme. The Scheme is registered and approved by HM Revenue & Customs under the Finance Act 2004. It is run in accordance with its Rules. Nothing contained in this can override the Rules.
CARE’s assets are entirely separate from those of the AA. It is managed by the Trustee in accordance with its Rules and legislative and tax requirements.
Pension rights are always taken into account as part of your assets when the court is arranging a divorce settlement or a dissolution order of a civil partnership.
The Trustee must comply with any order made by the court in divorce or dissolution proceedings. The order may affect your benefits under the section of the Scheme, including any benefits payable on your death.
If you need more details on pensions and divorce, you can request an information pack from the AA Pensions team. Also, please do not forget to complete a new Expression of Wish Form.
The Scheme is set up as a trust. The assets of the Scheme are held entirely separately from the Company and may only be used to pay benefits to and in respect of members and the expenses of running the Scheme until the Scheme is wound up. All the benefits from the Scheme are provided out of the funds of the trust.
The trust is administered by a trustee company called AA Pensions Trustees Limited (‘the Trustee’). The Trustee’s role is to ensure that the Scheme is managed according to the Rules, and that its assets are invested prudently in line with the Statement of Investment Principles. Its board is made up of employer appointed and member nominated directors, whose names appear in the Scheme’s annual report, which the Trustee publishes each year, and which reports on progress over the preceding twelve months. Copies are available from the AA Pensions team.
The Rules are the governing documentation of the Scheme and in the event of any ambiguity or inconsistency between the Rules and this guide or any announcement; it is the Rules that will apply. This is a guide and does not confer any entitlement to benefits.
The Trustee must prepare a statement concerning decisions about investment of the Scheme’s funds, as required by law, and review it from time to time. The Trustee must seek independent advice from a suitably qualified investment adviser and consult with the Company in arriving at this statement. Copies are available from the AA Pensions team.
The Pension Protection Fund (PPF) compensates members of eligible pension schemes when their employer becomes insolvent (as defined by the Pensions Regulator), and their scheme does not have sufficient assets to pay benefits to members. The PPF provides between 90% and 100% compensation to members, depending on whether they are currently receiving a pension. Future pension increases are only provided on a limited basis. The benefit payable to a scheme member from the PPF is restricted to a maximum. For more information on the PPF, visit its website at: www.pensionprotectionfund.org.uk
The websites listed below provide information on pensions, financial planning, and State benefits.
www.gov.uk/government/organisations/department-for-work-pensions — The Department of Work and Pensions provides information and advice on pensions, savings, and State benefits. You can also request a State Pension Forecast here.
www.hmrc.gov.uk — This site contains information about issues including tax, National Insurance, and tax credits.
www.unbiased.co.uk — The official site for personal independent financial advice. You can find general advice and contact details for an adviser in your area.
This information has been produced by the Trustee. If you have any queries relating to any section or to your benefits you should contact the AA Pensions team in the first place. Their contact details are:
The AA Pensions team
Aon
PO Box 196
Huddersfield
HD8 1EG
Telephone: 0345 850 6406
Email: AA.pensions@aon.com
When you call the Helpline the following questions will always be asked:
…plus one of the following additional questions:
You can also contact this team with any queries relating to your pension payslip.
We are here to help you so please do what you can to be prepared before calling. If you cannot pass the data security questions then we will not be able to divulge any information.
You can also contact the AA Pensions Department:
AA Pensions Department
Fanum House
Basing View
Basingstoke
Hampshire
RG21 4EA
Telephone: 01256 491 003
Email: pensions@theaa.com