History of the Scheme
The Scheme has seen a number of changes over the last few years triggered largely by legislative changes. Prior to 6 April 2006, there were two separate Schemes:
Football League Limited Players’ Non-contributory Cash Benefit Scheme (PBS)
Players were automatically entered into this Scheme which was funded entirely by the transfer levy. The Scheme provided a defined amount of benefit paid as tax free cash at normal retirement age. The benefit is based on:
- 3/80ths of final (capped) salary for each year of contracted employment.
- The Scheme also provided a life assurance benefit.
Football League Limited Players’ Retirement Income Scheme (FLPRIS)
When this Scheme was set up it was not possible for members of an occupational scheme to also pay into a personal pension arrangement. Thus, FLPRIS created a route for members who wished to make their own pension contributions to supplement the benefits that could be accrued in the Cash Scheme.
As such membership of this Scheme was optional with the resulting benefits being funded by players on a defined contribution basis. Members were able to make investment choices from a wide number of options and eventual benefits were in the form of income and additional cash.
Both Schemes enjoyed a special low retirement age of 35 but there was an earnings cap in place for any members joining after 1989.
Why change then?
There were a number of reasons why the Trustees decided to merge PBS and FLPRIS and form the new Professional Footballers Pension Scheme which were all triggered by the Finance Act 2004 (implemented 6 April 2006). The Act had the following implications:
- Removed all special low normal retirement ages
- Limited tax free cash to 25% of the value of benefits
- Allowed members of occupational schemes to also contribute to other pension arrangements
So as a result of the implications of the Finance Act 2004, the Professional Footballers Pension Scheme was formed as a merger of the two previous schemes from 6 April 2006.
Professional Footballers’ Pension Scheme (or PFPS)
The PFPS had a Cash Section and an Income Section with players being automatically entered into both. As above the Cash section was funded by the transfer levy and the Income section by players’ contributions. Again a wide choice of investments was available in the Income Section.
Similar to the above the Cash Section provided a level of benefit but this only continued to accrue if members contributed at least 3.75% of (capped) basic salary to the Income Section. A minimum level of benefit was also introduced from this time in that members will receive the equivalent of £1,000 for each year of contracted employment with a club, capped at £5,000.
The nature of the benefits changed, however, in that:
- Any Cash Section benefit accrued prior to 6 April 2006 could still be taken as 100% tax free cash
- Any Cash Section benefit accrued from 6 April 2006 had to be pooled with the fund available from Income Section with 25% of the total then being allowed as tax free cash
- The remaining benefit being taken as income
The retirement age remained as 35 for those who joined prior to 6 April 2006 but increased to 55 for those joining from that date.
Why change again in January 2011?
The Trustees in conjunction with the two Leagues had found that the current Scheme structure was not suiting the needs of members for a number of reasons. There was a low participation in the Scheme across all income levels and it was felt to be overly complex and difficult for members to understand. A number of different options were looked at to make the scheme more attractive and the benefits fairer to all members. Eventually the 2011 DC Section (including life assurance) was formed from 1 January 2011.
Players are automatically enrolled into the Scheme on signing a new contract and there is an opt-in facility for those on continuing contracts. Players can of course opt-out of the Scheme. The Scheme is funded by the transfer levy with an amount of £5,820 per player per year being invested in a trustee-designed fund. Members can pay additional contributions with a choice of investments being available.
On retirement, members can take up to 25% of the value of their 2011 Section Benefits as tax free cash. The remaining benefits will be taken as income.