TYPES
OF BENEFIT
We have to notice both the categories or types
of benefit which may be provided and also the means of calculating
them, bearing in mind that these are often modelled by the statutory
requirements referred to above.
These are:-
(a) A pension at a normal pension date, which
is usually in the range 60 to 75.
(b) A (possibly) reduced pension on early
retirement. Retirement is usually not available earlier than 50
other than on incapacity and may be subject to employer consent.
(c) An increased pension on late retirement.
(d) On leaving service before normal pension
date a return of the employee's contributions may be available
(or may be all that is available) to those who leave the scheme
before completing two years' pensionable service. Otherwise the
preservation requirements require that the scheme must provide
a preserved pension deferred until normal (or early or late) retirement.
(e) Often part of the retirement pension
can be commuted for a lump sum. In some schemes, principally public
service schemes, there is a smaller pension and no option to commute
but a separate entitlement to a lump sum.
(f) A lump sum benefit on death in service.
(g) A pension to a surviving spouse of a
member who dies:
(1) in service before or after normal
retirement date;
(2) after retirement and payment of the
member's pension has commenced.
Often there is no significant pension payable
where a member has left pensionable service and dies before reaching
normal pension date.
(h) Pension to other surviving dependants
of a deceased member.
(i) Once a pension becomes payable provision
may be made for annual increments or escalation.
(j) There may be a variety of other options
or rights such as:
(1) to surrender part of a member's pension
to provide a pension on death for his or her spouse or dependents;
(2) some schemes provide that the member's
pension will be paid for a guaranteed period. In other cases this
is only available on surrender of part of the pension in order
to purchase this;
(3) where the Scheme does not provide
for increases it may be possible to surrender part of the pension
to provide increases.
Broadly, these are the sort of benefits which
may be provided from any sort of occupational or personal pension
etc. However what you must note is this. There is no absolutely
guaranteed entitlement to any given benefit. There is no certainty
as to whether a member will survive to normal pension age. He
may die before that age. Even if he dies there is no guarantee
that he will be entitled to a lump sum death benefit. He may have
left service before that becomes payable. The actual value of
benefits which a person gets out of the Scheme will depend upon
what life, or death, holds for him. That may seem unfair but after
all the pension schemes and insurance arrangements exist in order
to cover risk and if that risk does not happen then the benefit
will not accrue. This uncertainty however must be borne in mind
in relation to the valuation of pension rights which is reverted
to later.
