What is levelling?

Levelling is a pension option which

enables employees to receive a larger
pension from the Scheme up to the
time they can start claiming their state
pension, and a smaller one afterwards.
In this way their income, when taking
account of their Scheme and state
pensions, remains roughly the same
or level throughout retirement.
The increased pension up to state
pension age and the reduced pension
afterwards are calculated so as to
ensure that the overall cost to the
pension fund is broadly the same
as for the normal pension.
Who can apply?
The option is open to any employee
who retires on pension (or receives
payment of a deferred pension)
before state pension age except if
retirement is due to ill health or a
deferred pension is being paid early
on ill health grounds.
How does it work?
Heres an example. All figures are
per annum. A male staff employee
retires five years before state pension
age with an annual Scheme pension of
11,000. Levelling is on the basis that
they will receive the full single persons
state pension.
Their Scheme pension for life without
levelling: 11,000
Current full amount of a single
persons basic state pension: 5,881
If they opt for levelling, their
Scheme pension increases by
4,669 to 15,669 for the five
years to state pension age.
At state pension age, their Scheme
pension is permanently reduced
by 5,881 to 9,788 so that when
it is added to the state pension,
their income remains the same
at 15,669.
The increased pension (15,669)
and the amount of the reduction
(5,881) are both affected by any
Scheme increases.
Assuming, for example, that the
Scheme pension increases by
16 per cent over the five years to
state pension age, the figures
would look like this:
Scheme pension just before state
pension age: 18,176
Amount of reduction at state pension
age: 6,822
Scheme pension from state pension
age: 11,354
Provided the state pension increases
by the same percentage, the basic
state pension will then be 6,822.
So total income from state pension
age will remain at 18,176.
Note: This is an example only,
figures will vary depending on a
number of factors including your
gender and grade.
The amount of the state pension in
future years cannot be accurately
forecast. If it increases at a different
rate to the Scheme pension then
income received before and after
state pension age could vary.
Is it possible to level on a figure
different to the amount of the single
persons state pension?
Yes, you can choose a lesser amount,
but not a larger one. You may want to
choose a lower amount if you know
that you will not receive a full state
pension at state pension age.
Does the option affect
dependants benefits?
No. Benefits for dependants (including
the five year pension guarantee) will be
calculated on the same basis as if you
had taken the normal Scheme pension.
Is it a good thing to opt for?
It is up to you, taking into account
your own personal circumstances.
Levelling is not intended to give you
a better pension. It simply provides a
different form of benefit, which you
might find attractive.
Are there any other points to watch?
Remember that under the levelling
option the Scheme pension is
reduced at state pension age. So if:
You do not qualify for a full state
pension for whatever reason;
or
You are by then already receiving
some form of state benefit
(eg incapacity benefit) which you
exchange for a basic state pension;
then your total income from state
pension age might actually go down
if you take up the levelling option.
You can find out about your
entitlement to state benefits from the
Department for Work and Pensions
(DWP) Office www.dwp.gov.uk.
The reduction in your Scheme
pension is for the rest of your life.
The reduced pension will qualify for
the same percentage increases as
those applied to pensions which
have not been levelled.
Pension Levelling Option
Retirements from 7 April 2014
National Grid UK Pension Scheme:
Defined Benefit (DB) Section
If the reduction in the Scheme
pension at state pension age
would result in it being less than
any minimum pension the Scheme
might have to pay (the Guaranteed
Minimum Pension), the figure used
for levelling will have to be restricted
to ensure this does not occur.
Please note: if you are retiring
from active service and considering
taking the levelling option, the
increased pension payable counts
towards your Annual Allowance.
For more information, please
visit the DB Section website at
www.nationalgridpensions.com.
You should check whether receiving
a higher income, through taking
the levelling option, could affect
any entitlement you may have to
state benefits.
Your Scheme pension will reduce
with effect from state pension age;
your state benefits will be paid
from the Monday following state
pension age.
When will I reach state pension age?
Your state pension age depends on
your date of birth. To confirm this,
please use the calculator at:
https://www.gov.uk/calculate-
state-pension
S000435 01/10
Contact us:
If you have any queries about how the levelling
option might work in your case, please contact
UK Pensions Operations:
UK Pensions Operations
PO Box 3604
Wokingham RG40 9JA
Telephone: Current Employees:
7780 8996 (internal), 01189 368996 (external)
Pensioners and Deferred Pensioners:
08457 585247
Email: pensions@nationalgrid.com
www.nationalgridpensions.com
Every effort has been made to ensure the accuracy of this leaflet.
It cannot, however, override the Trust Deed and Rules of the
Scheme or any legal requirements.
The following table gives a brief guide under current legislation:
Date of birth State pension age
Before 6 December 1953 65 for men, and between 60 and 65 for women
6 December 1953
5 October 1954
Between 65 and 66
6 October 1954 5 April 1968 66
6 April 1968 5 April 1969 Between 66 and 67
6 April 1969 5 April 1977 67
6 April 1977 5 April 1978 Between 67 and 68
On or after 6 April 1978 68
In November 2011, the government announced an accelerated timetable for
increasing the state pension age from 66 to 67, which will affect people born
on or after 6 April 1960, although this has yet to become law. The government
is also considering how state pension age might better reflect changes in life
expectancy in the future, which means that the timetable to increase state pension
age to 68 may also be brought forward, and further increases to state pension
age may be announced.
In the March 2013 Chancellors Budget, the government confirmed proposals to
introduce a flat rate state pension with effect from 2016. UK Pensions Operations
is monitoring these proposals as to how the levelling option might be affected.
Further information will be provided when more detail is known.
What if I take the levelling option and then the government announces
an increase to my state pension age?
If this happens, the reduction to your Scheme pension when you reach your
higher state pension age will be more than was originally quoted, to reflect the
extra period of time the levelling will have been paid.