Option 4

Reduced annual pension with Pension Increase Exchange (PIE) plus maximum cash lump sum

Please click here for an explanation of how PIE options work, including how they’re calculated.

With this option you can:

exchange part of your pension that increases in retirement, for a higher pension that doesn’t increase; and
exchange some of this higher pension for a one-off tax-free cash lump sum at retirement.

Your retirement quotation letter shows the initial annual pension amount which is payable monthly in equal instalments. Part of your pension may increase each year.

Your one-off cash lump sum is paid separately from your pension, and you’re likely to receive it before your first pension instalment.

Your retirement quotation letter shows the maximum cash lump sum you can take, but you can choose any amount less than this if you wish. If you choose a lower cash lump sum, you won’t need to exchange as much of your annual pension. If you choose an amount lower than the cash lump sum shown under Option 3, your annual pension would be increased accordingly. You just need to let Aptia know how much cash you wish to take by writing the amount on the relevant form.

As the PIE option is offered by the Company, you must agree to the change in benefits using the forms included in your retirement pack. See below for more information and contact Aptia if you have any further questions. You may also wish to take your own FCA-regulated financial advice – for help choosing an adviser please go to the MoneyHelper website.

See ‘Taking a cash lump sum at retirement’ in the Member Guide for information about the tax-free limits on cash lump sums. To find out more about pension lump sum allowances, go to the MoneyHelper website and click on the ‘Pensions and Retirement’ section.

Please note: if you choose this option, your Spouse/civil partner’s pension entitlement is unaffected.

Next steps

You will need to complete the following:

Retirement option form (show amount of cash you wish to take)
Retirement information form (including LTA form)
UK or overseas Bank Mandate form
Birth Certificate*
Marital Status Declaration form*
Marriage Certificate (if you’re married)*
Pension Increase Exchange – Additional Declaration form

* UK-based members – these forms will only be requested by Aptia if they’re unable to identify you electronically. Overseas members – will be required to send original Birth Certificate or change of name documents (e.g. Marriage Certificate) as standard.

See the timelines below showing how long we expect it’ll take to process your request.

How the PIE options work

With the PIE options, you can exchange part of your pension that increases in retirement, for a higher pension that doesn’t increase.

Exchangeable pension Your ‘Exchangeable pension’ is the part that can have a one-off increase now, in exchange for future increases. This means the initial amount will be higher but then it won’t increase at all in future.

Some parts of a pension must have a minimum level of increases by law. Your ‘Exchangeable pension’ is the part of your pension that you earned in the Group before 6 April 1997 where the Group provides increases above the minimum requirement.

Non-exchangeable pension This is the remainder of your pension payable from the Group, which you can’t exchange the increases on (or it doesn’t increase so there’s nothing to exchange). If you choose a PIE option, your ‘Non-exchangeable pension’ will receive the usual level of pension increases, if any. See ‘How will my pension increase?’ in the Member Guide for more information on the level of pension increases.

How the PIE options are calculated

To calculate your PIE options, an estimate is made of:

how many years your pension is expected to be paid for; and
how much your ‘Exchangeable pension’ is likely to increase in the future.

These estimates are used to calculate how much pension you can be paid if you choose a PIE option. On average, choosing a PIE option gives you a higher pension now that’s worth around 70% of the future pension increases you can exchange.

This percentage is calculated by taking the total value of the pension payments you’d expect to receive if you choose a PIE option and dividing it by the total value of the pension payments you’d expect to receive if you don’t choose a PIE option. This is called the Balanced Deal Percentage.

ScottishPower has chosen to offer members a Balanced Deal Percentage of 70% so that:

the offer is fair to members (i.e. members receive an immediate uplift in benefits but there’s a 30% reduction in the value of benefits); and
they’re reducing the long-term risks and costs of sponsoring the Group.

Any savings the Group makes if members choose a PIE option will be kept by the Group and used to make sure the Trustee can continue to pay members their pensions.

How the PIE option compares with the other pension options

The Breakeven point This refers to the point of time in the future when the total amount of pension you’ll receive under the PIE option is equal to the total amount you’re expected to receive if you don’t take the PIE option.

The Crossover point This refers to the point of time in the future when the annual pension you’ll receive under the PIE option is equal to the annual pension you’re expected to receive if you don’t take the PIE option.

Both the ‘Breakeven point’ and the ‘Crossover point’ depend on the level of the Retail Prices Index (RPI) measure of inflation in the future, as shown by the charts below.

The range of ages that these points may happen for you personally are shown in your retirement pack.

Please watch the short explainer video below for more information on how the PIE options work, including a detailed explanation of the ‘Breakeven point’ and the ‘Crossover point’.

Things to consider before choosing a PIE option

The Company offers the PIE options to provide more flexibility, as it may better meet your lifestyle needs. Here are some things to consider to help with your decision. You may also wish to take your own FCA-regulated financial advice – for help choosing an adviser please go to the MoneyHelper website.

Consideration	You may want to take a PIE option if…	You may not want to take a PIE option if…
Your health and lifestyle You may prefer a higher pension now to meet your current lifestyle needs.	You prefer to have a higher pension now while you feel able to enjoy it or have higher financial commitments such as a mortgage.	You prefer the security of receiving a pension that keeps pace with inflation to help meet your needs in later life.
How long you expect to live The longer you live, the longer your pension will be paid.	You think you may die sooner rather than later and, therefore, the higher pension now is more valuable to you than the future increases.	You think you may live for a long time and, therefore, the future increases to your pension are more valuable to you than the higher pension now.
Tax issues The increase to your pension now may affect the rate of tax you pay.	Your tax position wouldn’t change, and you’d pay tax at the same rate as you do currently.	You’d move into a higher tax band or exceed your Personal Allowance, meaning that you must start paying income tax.
State benefits The increase to your pension now would be included in the calculation of any means-tested State benefits that you may receive.	You don’t receive any means-tested State benefits or they’re unlikely to be affected by taking the higher pension now.	Your means-tested State benefits are likely to be reduced by taking the higher pension now. Note that your State pension isn’t means-tested so won’t be affected.
Other sources of income The impact of receiving a higher pension now on your overall financial situation depends on how significant your Group pension is compared to any other sources of income.	Your ‘Exchangeable pension’ is relatively small compared to your other income, or you have other increasing retirement income.	Your ‘Exchangeable pension’ forms a large part of your income and, therefore, an increasing pension would give you more financial security in the future. Your other pensions/sources of income don’t increase.
Your view of inflation Inflation results in an increase in the cost of living in the future. You receive annual increases on your ‘Exchangeable pension’ to help offset the effects of inflation.	You think inflation will be low during your retirement and more money upfront is likely to be more beneficial to you than future increases.	You prefer the security of the increases as you think inflation will be high during your retirement. You don’t want to take the risk that inflation is higher than expected,

Timelines

Active members leaving the Company:

Member contacts ScottishPower line manager asking to leave/retire (see MyHub)

Typically 3 months before retirement date

Line manager loads leaver notification to system and auto-email sent to Aptia

Within 5-10 working days of request

Aptia sends (illustrative) retirement quotation pack to member

Within 10 working days of email if less than 3 months to retirement date

Member returns completed forms

Aptia completes ID checks if required

Within 10 working days of receiving completed forms

Settlement of benefits

Tax-free cash lump sum

Usually within 5-10 working days of the settlement letter (this will only be settled after the retirement date)

First pension payment including any back payments due

Up to 6 weeks after the settlement letter due to payroll cutoff dates and additional Aptia checks

Aptia will recalculate retirement benefits once the retirement date has passed and final RPI inflation figure is known. If this results in a higher Final Pensionable Salary and increased retirement benefits, Aptia will pay any top up cash sum and put the higher pension into payment.

Active members continuing in employment:

Member contacts Aptia to opt out of the Group to access pension benefits

At least 2 months’ notice required before opt-out date

Aptia sends opt-out form

Within 10 working days

Member returns completed opt-out form

Any time before opt-out date

Aptia sends (illustrative) retirement quotation pack to member

Within 10 working days of receiving opt-out forms

Member returns completed retirement forms

Any time before opt-out date/retirement date

Aptia completes ID checks if required

Within 10 working days of receiving completed forms

Settlement of benefits

Tax-free cash lump sum

Usually within 5-10 working days of the settlement letter (this will only be settled after the retirement date)

First pension payment including any back payments due

Up to 6 weeks after the settlement letter due to payroll cutoff dates and additional Aptia checks

Deferred members approaching Normal Retirement Date:

Aptia sends retirement quotation pack to member

Around 6 months before Normal Retirement Date

Member returns completed forms

Any time before Normal Retirement Date

Aptia completes ID checks

Within 10 working days of receiving completed forms

Aptia recalculates retirement quotation if required due to change in calculation factors, and issues settlement letter (or new retirement quotation pack if the figures have reduced)

Within 10 working days of receiving completed forms and completed ID checks

Settlement of benefits

Tax-free cash lump sum

Usually within 5-10 working days of the settlement letter (this will only be settled after the retirement date)

First pension payment including any back payments due

Up to 6 weeks after the settlement letter due to payroll cutoff dates and additional Aptia checks

Deferred members requesting early or late retirement:

Member contacts Aptia to request a retirement quotation

Aptia sends retirement quotation pack to member

Within 10 working days of request

Member returns completed forms

Any time before retirement date

Aptia completes ID checks

Within 10 working days of receiving completed forms

Aptia recalculates retirement quotation if more than 3 months to retirement date and if required due to change in calculation factors, and issues settlement letter (or new retirement quotation pack if the figures have reduced)

Within 10 working days of receiving completed forms and completed ID checks

Settlement of benefits

Tax-free cash lump sum

Usually within 5-10 working days of the settlement letter (this will only be settled after the retirement date)

First pension payment including any back payments due

Up to 6 weeks after the settlement letter due to payroll cutoff dates and additional Aptia checks

Other retirement options

Option 1: Annual pension plus additional cash lump sum

Option 2: Reduced annual pension plus maximum cash lump sum

Option 3: Annual pension plus additional cash lump sum with Pension Increase Exchange (PIE)

Option 5: Cash Equivalent Transfer Value (CETV)

Option 6: Trivial Commutation

Useful contacts

MoneyHelper A free, Government-backed service offering impartial help on all aspects of money, including benefits, savings, budgeting and pension choices. It includes Pension Wise, which offers free, impartial guidance on retirement options for people aged 50 and over. Visit www.moneyhelper.org.uk.

Member Guide Contact Aptia Pensions OneView