TNAG-2397-FCO40-3484-Hong-Kong-Civil-Service-policy-1992 — Page 130

whether you think the assumptions that are used by the pension provider can be regarded as realistic. For a valid comparison with PCSPS benefits, any pension illustrations should be made on the basis of real investment returns, ie a yield in excess of price increases. The illustrations should also allow for the purchasing power of pensions to be protected if they are to provide a realistic basis for comparison with your PCSPS benefits;

iv. note that, while the scheme or policy may offer some flexibility in choice of death before retirement benefits, these should be compared with the benefits available under the PCSPS and you should bear in mind that, if the benefits are high, the cost will reduce the subsequent pension;

v. note that your earlier service in the PCSPS will not be aggregated with later service should you return to the civil service (this possibility exists with benefits preserved in the PCSPS) and that, if you subsequently move to a club scheme and transfer your benefits, they will not be treated according to club principles;

In addition, for personal pension schemes, self-employed pension arrangements and Section 32 policies you should:

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vi. establish whether the estimate given by the pension provider is based on all of the transfer value. It is normal for some of it to be used for the cost of setting up a policy, including the payment of commission to any intermediary involved. The amount may vary, but total expenses could be as high as 10 or 15 per cent of the transfer value. Where a deduction is made the investment return must be greater than if all the transfer value had been invested, and the size of the higher

return that is necessary increases the closer you are to retirement. You will not be able to make a proper comparison unless you know the amount to be invested;

vii. establish whether the scheme or policy provides an "open market option"—that is, that it will allow you to buy an annuity in due course from any company without penalty or only from that company, and whether it allows accrued benefits to be transferred to another scheme or policy;

Finally, for Section 32 policies only, you should:

viii. bear in mind that, while a Section 32 policy may seem attractive if it allows early retirement where the guaranteed minimum pension can be secured, early payment of pension

means a reduced pension on the basis of actuarial equivalence and this facility is available to anyone aged 50 or over with a preserved pension under the PCSPS.

TRANSFER FROM THE

PCSPS ON LEAVING THE SCHEME

OPTING OUT OF THE PCSPS

Since 6 April 1988, membership of the PCSPS has not been compulsory and since 1 July 1988, staff have been able, if they wish, to join a personal pension scheme instead, while continuing to be employed as a civil servant.

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