Reference Scheme Test

What it means for you

If you were a member of the DC Section before April 2016, you were contracted out of the State Second Pension up to that date. This means that you and the Company paid lower National Insurance (NI) contributions. 

In return for these contracted-out NI savings, the Scheme had to promise to pay members a minimum level of pension. This minimum benefit is known as the Reference Scheme Test (RST) benefit. 

If your pension account provides less than the minimum level, the Scheme will pay a top-up. If a top-up is required, it means the Trustee will need to decide how much flexibility you’ll have when you make your retirement choices. Please contact us if this impacts you and you’d like more information.

Calculating the RST benefit

Currently, the RST benefit is worked out using 1/80th of your relevant earnings for each year of pensionable service up to 6 April 2016. It is payable from age 65 and allows for certain other benefits such as a 50% spouse’s pension, a five-year guarantee and annual increases once in payment.

You spouse/civil partner’s RST benefit is simply 50% of your RST benefit.

Your relevant earnings are the average of 90% of your total earnings between the lower earnings limit and the upper accrual point* over your last three years of active Scheme membership.

*For tax years up to 2009/10, this is the upper earnings limit.