Examples of the 50/50 option

Example 1
 
A member is paying off a loan and is finding things difficult financially so she decides to opt for the 50/50 scheme for the remainder of the time she has left on the loan. Her pensionable pay is £15,000 a year and she would contribute 5.8% (£58 per month after tax relief is applied) in the main scheme. For the time she is in the 50/50 option she contributes half that amount: 2.9% (£29 per month after tax relief).
 
In return she builds up a pension with an accrual rate of 1/98th (in contrast with the main scheme accrual of 1/49th) so if she stays in the 50/50 section for 2 years she will build up an annual pension of £306. This amount will be added to her pension in the main scheme.
 
While she is saving in the 50/50 scheme she remains eligible for the full value of other benefits of the scheme for example her death in service lump sum would be £45,000 (3 times her pensionable pay).
 
 
Net Contribution in the main Scheme
£58 per month
Net Contribution in the 50/50 option
 £29 per month
Pension build up before revaluation in the main Scheme
1/49th = £306 per year
Pension build up before revaluation in the 50/50 option
 1/98th = £153 per year
Death in Service Lump Sum
£45,000
Death in Service Lump Sum
 £45,000
 
 
Example 2
 
A male member’s partner has been made redundant and they are facing a difficult time until work can be found. He decides to opt for the 50/50 scheme. 6 months later their finances are back to normal. His pensionable pay is £55,000 a year, so during the 6 months of 50/50 membership he has paid at a rate of 4.25% instead of 8.5%.
 
After tax relief, this has reduced his contributions by a total of £701 during the period of 50/50 membership. The pension built up in that year has reduced from 1/49th of £55,000 for the whole year to 6 months at 1/49th and 6 months at 1/98th (from £1,122 to £842) whilst his death in service lump sum has remained at £165,000 throughout.
 
 
Net Contribution in the main Scheme (6 months)
£234 per month
Net Contribution in the 50/50 option (6 months)
 £117 per month
Pension build up before revaluation in the main Scheme
1/49th x 0.5 (6 months) = £561
Pension build up before revaluation in the 50/50 option
 1/98th x 0.5 (6 months) = £281
Death in Service Lump Sum
£165,000
Death in Service Lump Sum
 £165,000