If you’re a Contributing or Deferred member of the Group who is approaching retirement, this guide will help you understand the different options for how and when your benefits are paid.
This content is currently being broadened to provide information for Gas Scheme members.
Retirement planning is a complex area which involves making big financial decisions – this guide sets out some of the key points to help you make informed decisions that are right for you. It also has a section about how you can access financial advice, if you feel that you need it.
The information is set out as an interactive online guide – this means you can click on the topics below to jump to the sections that interest you the most. It is important to understand all your options and what they might mean for you.
An overview
of your benefits
Your membership of the National Grid Electricity Group provides you with a number of valuable financial benefits.
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A guaranteed Income
(a pension), which you can start to receive between the ages of 55 and 75 – although the Group’s Normal Pension Age is 60 or 63 for most members.
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Protection for your dependants
For most members, the Group provides a tax-free lump sum and a pension to your spouse, civil partner or dependent partner, if you were to die before them.
Protection for your dependants
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Increases each year –
To protect your retirement income against inflation. -
A tax-free cash sum at retirement –
An automatic tax-free cash lump sum at retirement plus the option to give up some of your pension in exchange for up to 25%* of the value of your benefits as tax-free cash. -
A pension that’s financially backed
by National Grid Electricity Transmission, which has Ofgem safeguards in place.
However, changes in pension legislation made in 2015 mean that you now have flexibility over how you access your pension benefits. Instead of taking a pension from the Group, you can access other options by transferring your benefits out of the Group to other approved pension arrangements. There are pros and cons, as this guide will explain. For many members, staying with the Group is likely to be the best choice for them, but for some these other options may be appropriate. If you want to know more about your Group pension, please contact Railpen to request a benefits quotation
* Up to a maximum of £268,275 for most members
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When can you retire?
This depends on when you joined the Group. For most members, Normal Pension Age is 60 when your pension can be paid without reduction for early payment; and for some members it’s age 63. Most members have the option to retire earlier or later.
Railpen will write to you approximately seven months before your Normal Pension Age to ask if you would like to receive details of your Group benefits and retirement options with a view to accessing your benefits.
If you confirm you do, Railpen will send you a Member Options pack. This will contain a quotation of your benefits plus the necessary forms for you to complete and return. If you wish to explore your options outside the Group and you are eligible for funded advice, the pack will provide details about how to contact WPSA, the Group’s appointed independent financial adviser.
If you are a Contributing member, still employed by National Grid and paying into the Group, the pension figures shown in your Member Options pack are illustrative and not guaranteed. Contributing members would have to opt out of the Group first in order to transfer their benefits. Once you have opted out of the Group, you cannot opt back in.
If you are a Deferred member, your final benefits have already been calculated, and your transfer value is guaranteed for a period of six months.
You can see the retirement process at Normal Pension Age here.
The earliest age most members can retire is currently age 55, although this is due to rise
to age 57 from 6 April 2028. You can currently choose to retire at any time from age 55 but your pension and your lump sum will be reduced to take account of the fact that they are being paid early.
Some members have the right to retire at age 50 in certain circumstances. For example,
if you left service because of redundancy, your deferred benefits will be payable from age 50 without any reduction for early payment (or age 55 if you joined after 6 April 2006).
You may also be eligible to receive your pension before age 55, if you are retiring on ill-health grounds. For further information on this, please contact Railpen.
If you are interested in taking early retirement you can request a quotation from Railpen before your Normal Pension Age. Railpen will provide you with a Member Options pack.
You can see the early retirement process here.
Just as you can ask for your pension to start before your Normal Pension Age, you can also take your pension later.
If you are a deferred member, and you postpone payment of your pension beyond your 63rd birthday, it will not attract any further increases in deferment. After the age of 63, pensions will be paid with no additional increases, although arrears are included. Once in payment, pensions are subject to annual increases.
If you are a contributing member, you cannot postpone the payment of your pension beyond your 75th birthday. However, if you carry on working after Normal Pension Age, you will build up extra years of contributing service – for most members this is up to a maximum of 45 years. How this is achieved depends on your Normal Pension Age as set out below:
- If your Normal Pension Age is 63: you will be required to pay contributions for the extra pensionable service you build up after age 63.
- If your Normal Pension Age is 60: no further contributions are payable if you work after age 60, but you will still build up extra pensionable service.
Whatever age you decide to retire, you will still have the option to give up some of your Group pension for a tax-free lump sum when your pension starts.
If you have purchased Money Purchase AVCs, at retirement, the value of the fund is used to either enhance your lump sum payable from the Group to the permitted limit or can be used to ‘buy’ extra pension by way of an annuity, which you can purchase from the AVC provider or from an alternative insurance company. Please visit the AVC page of the website for more information or speak to Railpen enquiries@railpen.com.
If you’re made redundant
If you are leaving National Grid on redundancy terms, the information Railpen sends you may not show your latest figures until after you have left the Company.
If you wish to seek advice from WPSA you should make them aware of this, as their advice will need to reflect your final figures.
You should also make your line manager or HR representative aware early in the process, so that they can consider how you can obtain independent financial advice within the relevant timescales.
There’s an information sheet on redundancy available on the Group website.
Your alternative options
From annuities to drawdown, this document explains your options for accessing your benefits outside of the Group.
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Getting financial advice
If you are considering transferring out of the Group and your transfer value is over £30,000, you are legally required to seek financial advice. Funded advice is available to eligible Group members if required.
Read more
Introducing WPS Advisory Ltd
The Group provides
access to funded advice through WPS Advisory Ltd (WPSA), a specialist firm of financial advisers who are authorised by the Financial Conduct Authority.
Read more
What is a transfer?
As a Contributing or Deferred member of the Group, you have the option to move the value of all your benefits in the Group, including your benefits payable on death, to another pension arrangement, where you might have more flexible options for accessing them.
A transfer, or Cash Equivalent Transfer Value (CETV), is the cash value placed on your pension benefits. This is the amount that is available to transfer to an alternative pension plan in exchange for giving up your rights under the Group.
Subject to the rules of the receiving scheme, a transfer payment can be made to another
HMRC-registered pension scheme. The option to transfer is conditional on certain regulatory requirements including, in most cases, getting specialist advice from a financial adviser before you make any decisions:
- Contributing members would have to opt out of the Group first in order to transfer out
- Deferred members generally can transfer their benefits at any time before retirement.
The transfer is paid as a single sum of money that is transferred to another approved pension arrangement of your choice.
If you transfer your benefits, you cannot change your mind later and transfer back into the Group. Likewise, under current legislation, once your pension in the Group starts to be paid, you no longer have the option to take a transfer.
A transfer value is calculated by the Group Trustee on advice from the Group’s specialist actuarial advisers, and by law, it must reflect the expected cost of providing your benefits within the Group. This could be quite different from the cost of buying retirement income from another pension arrangement.
The Group Trustee takes into account certain factors such as how long members are expected to live, what might happen with future inflation, and what might happen to the Group’s investment returns. Transfer values can therefore change, sometimes significantly, as investment markets move or as the Group Trustees’ expectations change.
If you decide to transfer, the benefits you receive will depend on what options your new pension arrangement offers you. There is quite a lot of choice in the market and some of these options are introduced and explained here.
If you are considering transferring your pension, you need to be aware of pension scams.
The transfer process is complex and can take several months to complete, so please take this into consideration when you are planning for your retirement.
Deciding whether to take a transfer value from a defined benefit pension scheme like the Group is a significant decision.
In recognition of this, current legislation states that anyone who wishes to take a transfer of £30,000 or more must obtain appropriate, independent financial advice before the payment can be made. Proof that you have received this advice will be required before any transfer can go ahead.
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If you transfer
After taking financial advice, you may find that staying with the Group is the best choice for you.
However, one of the reasons that people sometimes choose to transfer their pension out of the Group is that the alternative options give them more flexibility in how they take their benefits.
Let’s have a look at these alternative options.
Taking advice
Transferring your pension out of the Group may not be in your best interests, as you’d be giving up a number of valuable benefits that may be more suitable for your needs.
If you are interested in exploring all your retirement options, the Group provides access to independent financial advice for eligible members, to help you make informed decisions, and as far as possible, to help prevent anyone from receiving or acting on inappropriate or fraudulent financial advice.
This section covers:
- Who is eligible for paid-for advice?
- Who is WPSA?
- Using your own financial adviser
- Your appointment with WPSA
The Group provides access to funded, independent financial advice through a financial adviser called WPS Advisory Ltd (WPSA). More information on WPSA can be found here.
There is no obligation for you to speak to WPSA if you do not wish to explore your options further, or if you’d prefer to use your own financial adviser. If and/or when you decide to speak to WPSA is entirely up to you.
The majority of contributing and deferred members will be eligible to receive funded advice as they approach retirement. However, a small number of members may not be eligible, for example, overseas tax residents or if you have a very small transfer value.
As you approach retirement, you’ll receive a Member Options pack from Railpen, which will make it clear whether the offer of funded advice applies to you.
Even if you don’t qualify for funded advice in relation to your Group benefits, you can still contact WPSA if you want to speak to them, although you will have to pay for this yourself.
The Group will pay for one piece of advice from WPSA. That one piece of advice might
be provided over a series of telephone sessions and through correspondence. In certain circumstances, or if you require further advice after the one piece of funded advice, additional fees will be payable. If this is the case, WPSA will explain any additional fees. This will always be quoted in pounds and pence to you before any discussions go ahead.
While WPSA is able to discuss general tax issues with you, they are not specific tax advisers, so depending on the complexity of your circumstances there may be additional fees payable by you. If WPSA feels you need to seek advice from a separate tax specialist, they will tell you and you will need to meet the costs of this advice yourself.
Do I have to take financial advice?
No. If you are happy to claim your benefits from the Group without looking at other options, there’s no obligation or legal requirement for you to seek independent financial advice or speak to WPSA.
WPS Advisory Ltd (WPSA) is a specialist firm of financial advisers who work with pension schemes, such as the Group, to provide advice and support to their members. They are authorised by the Financial Conduct Authority (FCA) and abide by a set of rules which seek to ensure they always represent members’ best interests. Further information on WPSA can be found in this Q&A.
WPSA provides bespoke, impartial financial advice based on Group members’ individual pension figures and personal circumstances. They’re familiar with the Group’s Rules and Railpen’s processes and their advice is not conflicted as they don’t sell any products and are not paid commission. They receive the same fees regardless of the recommendations they make and are completely independent of the Group Trustee, the Company, Railpen, and the Electricity Supply Pension Scheme (ESPS).
You may choose to use WPSA as your adviser if you wish, or you may prefer to use your own financial adviser. You would need to pay for any advice obtained from your own adviser, as the Group Trustee has negotiated preferential rates with WPSA Advisory Ltd and will only pay for advice that is delivered through them.
The aim of the discussion is for the adviser to get a clear picture of how you manage your finances, what your personal circumstances are, and what you are looking to achieve. The initial discussion typically lasts about 90 minutes, and you might have a few follow-up calls and emails after that. Once you’ve both agreed on a course of action, WPSA will produce a written recommendation for you and set out any next steps. It would not be unusual for the whole process to take six to eight weeks from your initial discussion or potentially longer if you need to obtain additional financial information.
You can find out more about your appointment with WPSA, including how to set it up and additional charges that may apply, here.
You are welcome to use your own financial adviser if you wish. However, the Group Trustee has negotiated preferential rates with WPSA Advisory Ltd and will only pay for advice that is delivered through them. You would need to pay for any advice obtained from an alternative adviser.
If you use your own adviser, check the Financial Services Register to make sure that anyone offering you advice or other financial services is FCA-authorised. If you don’t use an FCA-authorised firm, you also won’t have access to the Financial Ombudsman Service or the Financial Services Compensation Scheme, so you are unlikely to get your money back if things go wrong.
If the firm is on the FCA Register, you should call the Consumer Helpline on 0800 111 6768 to check the firm is permitted to give pension transfer advice. If your adviser does not have this permission, the Group Trustee cannot pay the transfer.
Protection for your dependants
Find out about the valuable benefits the Group provides your loved ones.
- The Scheme provides a death-in-service lump sum benefit equal to four years of your pensionable salary if you die whilst still employed by the Company.
- If you were to die after payment of your pension has started, the Group Trustee will pay a pension to your spouse or civil partner, broadly equal to around two-thirds of the pension that was being paid to you when you died. A child’s pension will be paid up to the age of 18, or if the child continues in full-time education or vocational training up to the earlier of ceasing to be in full-time education or vocational training or age 23 (at the discretion of the Group Trustee).
- If your death is within five years of your pension starting, there will also be a lump sum equal to the remainder of the first five years of payments that would have been payable to you – this is known as a five-year guarantee.
- If you do not leave a spouse or civil partner, the pension may be paid to a dependant partner, at the Group Trustee’s discretion, as long as they were financially dependent or interdependent on you at your date of death.
It is important that you let the Group Trustee know who your financial dependants are. This can be done by completing a Nomination of Dependant form.
You can also complete an Expression of Wish form to indicate who you would like any death lump sum to be paid to.
Payment of death benefits is at the discretion of the Group Trustee, and while they are not bound by the information you provide they will give full consideration to the choices you indicate.
For more information on death benefits please visit the ‘What happens if I die?’ page on the Group website - click here if you are a Contributing member, and click here if you are a Deferred member.
CloseWatch out for pension scams
Transferring your pension out of the Group means you could fall victim to a pension scam.
If you are considering transferring your pension, you need to be aware of pension scams where unscrupulous advisers personally benefit by encouraging people to invest in inappropriate or risky investments while paying high charges.
This could result in you losing all or significant amounts of your pension and potentially make you liable to a tax charge.
Scammers can be convincing and financially knowledgeable, with credible-looking websites, testimonials and materials that are hard to distinguish from the real thing.
The Pensions Regulator provides information on how to protect yourself.
The Financial Conduct Authority’s website also provides information on how to avoid scams and includes specific guidance relating to Covid-19.
CloseUseful links
There are lots of resources online to help you understand your options and how to make an informed decision.
MoneyHelper is the Government’s financial information and guidance service that provides free and impartial support about workplace and personal pensions to anyone aged over 50 with defined contribution pension savings. It also provides information about general financial issues: www.moneyhelper.org.uk.
You can find suggested questions to ask your adviser on the FCA’s website.
Further information on pension transfers is available at: https://www.fca.org.uk/consumers/pensiontransfer.
For queries about your Group pension or to request a benefits quotation, please contact Railpen
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