Eligibility
If you joined the Which? pension arrangement before 1st April 2004 you may be a member of the Scheme.
After this date you may have joined the now closed Defined Contribution (DC) Section, and you are no longer a member of the Scheme.
You can find out more about the now closed DC Section here.
Pension at Normal Retirement Age
Under the Scheme Rules the normal retirement age from the Scheme is age 65, which means that the Final Salary Pension that is calculated is for a pension income that starts on your 65th birthday and is paid to you for the rest of your life.
When you retire from the Scheme, you will receive the Final Salary Pension or the Money Purchase Pension, whichever is more. You only get the higher of the two possible pensions.
You do NOT receive both pensions.
You may not be entitled to a Final Salary Pension. This is usually because you waited too long after being employed to join the Scheme. In this case the Money Purchase Pension is the only benefit that can be paid to you under the Scheme Rules.
Even if you are entitled to a Final Salary Pension, the Money Purchase Pension may still provide you with a higher income in retirement.
If you are unsure whether you qualify for the Final Salary Pension, please contact us.
Why are there Two Types of Pension?
This is because of the way the Scheme is funded.
Put simply, the contributions you and the employer have paid on your behalf have been invested in an account in your name - known as your Money Purchase Account - with the intention that by the time you retire, this invested money should have grown enough for the Scheme to use it to pay at least in part for the Final Salary Pension that the Scheme has undertaken to pay you.
The Final Salary Pension is calculated from your salary and service, hence its name.
As noted above the contributions that have been invested make up your Money Purchase Account. To decide what type of pension you should be paid when you retire, we also calculate what potential annual income this Account could pay for directly.
In other words the Scheme Actuary tells us how to convert your Money Purchase Account to an annual income. This conversion depends on many considerations including your gender and age and the condition of financial markets.
This is known as your Money Purchase Pension, because it is calculated directly from the money in your Money Purchase Account.
It is possible that, if there is an extended period of investment performance that is significantly better than expected, the money in your Money Purchase Account could be higher than expected and so the Money Purchase Pension could be higher than the Final Salary Pension.
In this situation the Scheme Rules state that you, the member, should benefit from this better-than-expected investment performance, and so you are paid the higher Money Purchase Pension instead of the Final Salary Pension.
This type of hybrid pension arrangement is sometimes called a Money Purchase Underpin, because your eventual income is underpinned by the actual investment performance of your Money Purchase Account.
Regardless of actual investment performance, you will always be paid an income that is at least the Final Salary Pension that the Scheme has undertaken to pay you, provided that you are entitled to it.
Your annual benefit statement tells you whether we think your income payable at age 65 would be a Final Salary Pension or a Money Purchase Pension, given the conditions current at the statement date.
Because the two pensions are calculated in two completely different ways and are dependent on conditions that change from month to month, it is not possible to accurately predict today which one will give the better income when you actually come to retire.
You can find out more about how the two different pensions are calculated here.
It is worth noting that your monthly pension income is taxable under the same rules as your salary, whether you take a lump sum or not.
Pension Commencement Lump Sum
At the point your pension starts you may take a tax-free cash lump sum. If you choose to do this, you must give up some of your monthly income in exchange and thus receive a reduced monthly income. You may do this regardless of whether you receive the Final Salary Pension or the Money Purchase Pension.
If you have money in your Prudential AVC Account you can use this money towards the lump sum and so obtain a smaller reduction in your monthly income.
If you have money in the Aviva Master Trust, you can use this money towards the lump sum and so obtain a smaller reduction in your monthly income.
The maximum lump sum you may take is restricted by a complex calculation set out by tax legislation, but currently it is very roughly five times your annual pension income at age 65, assuming you have no Prudential AVC Account or Aviva Master Trust account.
On 15th March 2023 the Government announced additional measures that freeze the limit on the pension commencement lump sum across all your pension arrangements at £268,275. This announcement is effective from 6th April 2023. This means your lump sums from all your pensions may never be more than £268,275.
Further Information
AVCs, Aviva Master Trust and Additional Benefits
If you have made additional voluntary contributions (AVCs) to Prudential this money has been added to a separate Prudential AVC Account.
If you have received an augmentation payment from your Employer or transferred-in a pension from another pension arrangement to your Scheme pension, this money also may have been added to a Prudential AVC Account.
(Alternatively you may have used such payments to purchase AVCs with different AVC providers – see below).
You can take all the money in your Prudential AVC as part of your Scheme pension, either to buy additional monthly income or towards your pension commencement lump sum or any mixture of both.
Alternatively you can take this money as a completely separate lump sum before or after your main Scheme pension.
You may have saved AVCs with Utmost Life (formerly Equitable Life), Clerical Medical or Legal & General. These AVCs were transferred to the Aviva Master Trust in March 2024, and can be used in exactly the same way as your Prudential AVC Account as described above.
If you saved AVCs with Legal & General after you had switched membership to the now closed DC Section, the Aviva Master Trust funds these were transferred to cannot be used in the same way. They can only be used towards your pension commencement lump sum. They cannot be used to buy additional pension.
Lifetime Allowance
On 15th March 2023 the Government announced measures that remove the Lifetime Allowance tax charge and freeze the limit on the pension commencement lump sum (PCLS) at £268,275, being 25% of the LTA in effect at that date (£1,073,100). This announcement is effective from 6th April 2023.
Future legislation is expected to remove the Lifetime Allowance altogether but retain the limit on the PCLS.
Switched Membership to DC Section
If you were a member of this Scheme on 1st April 2004, you may have chosen to switch membership to the now closed DC Section of the Scheme any time from that date.
If you were still working for Which? on 1st April 2019, you were switched automatically to the now closed DC Section.
All of the money in the DC Section was transferred to the Aviva Master Trust in March 2024. This money can still be used towards your pension commencement lump sum.
Pension Wise
Pension Wise is a free and impartial government service – see www.pensionwise.gov.uk.
Pension Wise only provides guidance on defined contribution pensions, such as Additional Voluntary Contributions (AVCs) and the Aviva Master Trust.
You can book an appointment to get guidance over the telephone or a face to face meeting. You can talk about your pension options and what you can do next. At the end of your appointment you will get a printed summary of the options and next steps you need to take.