AFPS15 allows members to transfer in benefits from previous pension arrangements (subject to some restrictions) if the member requests this option within 12 months of joining AFPS15. Actuarial factors are required to convert the transfer amount into AFPS15 transfer-in pension.
The pension awarded is revalued in an identical manner to the CARE pension that accrues due to subsequent service, i.e. in service it is revalued with reference to AWE.
The Pensions Regulator (tPR) issues guidance on transfers. The guidance suggests that the following principles should be taken into account:
- from a transferring member's perspective, the transfer credit should be fair value for any transfer received;
- a transfer credit should not be expected to require additional financing from the employer in the long term unless agreed by the employer in advance.
The guidance also states that, within these principles, it will usually be appropriate to use assumptions that are consistent with the transfer out (i.e. CETV) basis. However tPR also recognises that it may be appropriate to allow for selection, particularly in respect of higher than average future pay.
The guidance expects disclosure of the assumptions used in the calculation of the transfer-in credits offered.
We understand that Medical and Dental Officers (MODOs) who join AFPS15 will receive AFPS15 EDP if they stay sufficiently long that they are eligible. Separate factors are therefore not required for MODO AFPS15 non-Club transfers-in as the main factors will apply.
The consolidated factors workbook contains factors to determine transfer-in pension for incoming non-Club transfers going into AFPS15. We have not provided factors for those members who are age 60 or older. If any such cases arise then they should be referred to GAD on an individual basis.
We calculate the transfer-in pension by equating the transfer value to the value of the transfer-in pension:
Incoming transfer value = (Transfer in pension x Member factor) + (Transfer in pension x 0.625 x Spouse factor)
This rearranges to give the following:
Transfer in pension = Incoming transfer value / (Member factor + 0.625 x Spouse factor)
For a member with a non-integer DPA of Y years and M complete months, who requires the use of a factor at age N, interpolation between two DPA tables will be necessary. The formula to use is as follows:
Factor (age N, DPA(Y, M)) = Factor (age N, DPA(Y)) + (M/12) x [Factor (age N, DPA(Y+1)) - Factor (age N, DPA(Y))]
Both the member and spouse's factors will be interpolated using the above formula.
If a transfer-in is accepted from an occupational pension scheme, the period of time the member was an active member of the previous occupational pension scheme is counted as qualifying service in AFPS 15.
If a transfer-in is accepted from a personal pension scheme, the member is automatically eligible to deferred membership of AFPS 15, regardless of whether or not they have two years of qualifying service.
If a transferred-in member serves until NPA 60 and then retires, the transferred-in pension will come into payment immediately alongside the regular AFP15 pension. The transferred-in pension will be indexed in payment at the same rate as pensions accrued under AFPS 15 (i.e. currently CPI).
If a transferred-in member leaves service before NPA 60 with only a deferred pension, the transferred-in pension will be payable from DPA alongside the deferred pension. The transferred-in pension will be revalued at the same deferred revaluation rate as pensions accrued under AFPS 15 for the period between leaving service and DPA (i.e. currently CPI).
For cases where a transferred-in member leaves service before NPA 60 with entitlement to EDP benefits, the transferred-in pension will impact on EDP benefits as per the AFPS15 deferred CARE pension.
The transferred-in pension interacts with ill-health benefits as follows:
- Tier 1: the transferred-in pension will not impact on Tier 1 lump sums awarded where a member retires on Tier 1 ill-health pre the EDP point; however it will impact on EDP benefits awarded where a member leaves on Tier 1 ill-health after the EDP point as per the third paragraph of Interaction of Transferred-In Pension with AFPS 15 Benefits above. In either case the transferred-in pension is payable from DPA as per the second paragraph of this subsection.
- Tier 2: The transferred-in pension becomes a deferred pension if it was transferred-in less than 2 years prior to the date of retirement; otherwise it is payable immediately.
- Tier 3: The transferred-in pension becomes a deferred pension if it was transferred-in less than 2 years prior to the date of retirement; otherwise the treatment of the transferred-in pension depends on the amount of enhanced service the member is awarded as follows:
- If, after the service enhancement has been applied, the Tier 3 ill-health pension from AFPS15 service is based on more than (or is equal to) the lower of 25 years' service and total possible service to NPA (i.e. the minimum service guarantee does not bite), the transferred-in pension is paid immediately.
- If, after the service enhancement has been applied, the Tier 3 ill-health pension from AFPS15 service is based on less than the lower of 25 years' service and total possible service to NPA (i.e. the minimum service guarantee bites), the greater of the following is paid:
- The post-guarantee enhanced pension (i.e. based on 25 years' service and total possible service to NPA); and
- The aggregate of the pre-guarantee enhanced pension and the transferred-in pension.
i.e. the transferred-in pension is only paid if adding it to the pre-guarantee enhanced pension yields a larger pension than the post-guarantee enhanced pension.
The transferred-in pension will impact on death benefits as follows:
- Death in service: since the pension is based on the Tier 3 ill-health pension, the transferred-in pension impacts on the death in service pension as per the fourth paragraph (part 3) of the Interaction of Transferred-In Pension with AFPS 15 Benefits subsection. The death in service lump sum is based on pensionable pay and so the transferred-in pension does not impact on this.
- Death in deferment: the transferred-in pension is included in the calculation of the dependant's pension and lump sum.
- Death in receipt: the transferred-in pension is included in the calculation of the death in service dependant's pension and in the calculation of the guarantee payment when death occurs within 5 years of retirement.
Any commutation options chosen for the benefits alongside which the transferred-in pension is eventually paid will also apply to the transferred-in pension. Such options are subject to the relevant scheme rules and HMRC limits.
Where a member chooses early or late payment of deferred benefits, this choice will automatically be applied to any transferred-in pension. The general early and late retirement factors will be used to adjust the amount of transferred-in pension to be paid in such cases.
Where a member chooses to stay in service beyond NPA 60, the late payment uplift due on leaving service can be calculated identically to that given to the AFPS 15 benefits.
Similar to the treatment of regular AFPS15 pension, where a member who has a transferred-in pension leaves and then rejoins, the transferred-in pension will be revalued at the relevant in-service revaluation rate for the duration away from service only if the member rejoins within 5 years. Otherwise it will become a deferred pension and will be revalued at the AFPS 15 deferred revaluation rate until coming into payment.
Transferred-in pension will count towards the AFPS 75 and 05 abatement for rejoiners with service in both AFPS 15 and AFPS 75 or 05.
Subject to the same rules and limits as regular pension, transferred-in pension can be allocated.
If the transferred-in pension is converted into an addition to the EDP benefits, these payments will be made under the EDP scheme; in all other cases the payments will be made under the AFPS 15.
For younger members (below age 40) who transfer to AFPS 15, there is the possibility that they will retire before NPA with EDP benefits. Transferred-in service does not count towards the EDP qualification criteria - hence only members who transfer before age 40 could reach 20 years' Armed Forces service before NPA and hence potentially qualify for EDP benefits.
The transferred-in CARE pension is to impact on EDP benefits as per the AFPS15 deferred CARE pension; this affects the potential value of the transferred-in pension pot. There is allowance for potential EDP benefits as appropriate in the non-Club transfer-in factors.
