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Members already in receipt of benefits do not usually have an entitlement to a cash equivalent transfer value. The pensioner cash equivalent value should be calculated using the method and factors in this note, but used for divorce purposes only.

There are two sets of tables, which can be found in the Consolidated Factors Workbook:

Table 301: Pensioners who did not retire on ill health grounds
Table 302: Pensioners who retired on ill health grounds

The main difference between Table 301 and Table 302 is the difference in pension increases below age 55.

AFPS15 members who retired on Tier 1 ill health benefits should be treated as standard deferred members as they are not provided with immediate pension benefits. The section entitled Active members and deferred pensioners therefore applies to these members.

AFPS15 members in receipt of Early Departure Payments (EDP) are treated as deferred members as EDPs are not considered to be pension benefits. The section entitled Active members and deferred pensioners therefore applies to these members.

Calculation

The pensioner cash equivalent should be calculated as follows:

CE = (MP x F_p) + (SUR x F_sur) - (PRE GMP + 0.15 x POST GMP) x F_gmp

Where:

MP = current member's pension (including Added Pension), see the section entitled Pension Benefits below

SUR = pension payable on the death of the member to their spouse or partner, see below

PRE GMP = annual GMP accrued before 6/4/1988, including revaluation

POST GMP = annual GMP accrued after 6/4/1988, including revaluation

F_p = factor for member's pension - Table 301 or 302

F_sur = factor for survivor's pension - Table 301 or 302

F_gmp = factor for GMP saving - Table 301 or 302 (factor should be selected taking into account the date at which the member reaches State Pension age - see the section entitled Adjustments for Guaranteed Minimum Pension)

The appropriate factors should be taken from the tables in force at the valuation day for calculations being completed after a pension sharing order has been made, or the tables in force at the calculation date for other cases. In all circumstances, the factors should be selected by reference to the member's age as at the calculation date.

Pension benefits

If the member's pension is reduced due to abatement or suspension due to reemployment, then the abatement reduction should be ignored for the purpose of this calculation. Benefits should be calculated as though the member had ceased reemployment and valued accordingly. Any Added Pension that the member is receiving should be included in the calculation.

Where the benefits have not yet come into payment, the amount quoted is the statutory CETV. The CETV methodology and factors are used even in cases where the member is not entitled to transfer his/her benefits.

The benefits to be valued for serving personnel are those that would be payable if the member had left service at the relevant date - either deferred benefits or the payment of immediate benefits. Those with less than 3 months of service would normally be entitled only to a refund of contributions. However, the deferred benefits should be valued for divorce purposes in such cases.

AFPS15 members still in service at the calculation date who are over the age of 60 are entitled to receive their pension benefits immediately on leaving service. The section entitled Active and deferred members entitled to pension benefits immediately therefore applies to these members.

Deferred AFPS15 members who are beyond their SPA and have chosen to delay receipt of their deferred pension are entitled to receive their benefits immediately. The section entitled Active and deferred members entitled to pension benefits immediately therefore applies to these members.

AFPS15 members who retired on Tier 1 ill health benefits should be treated as deferred members as they are not provided with pension benefits until SPA. This section therefore applies to these members.

AFPS15 members in receipt of EDP are treated as deferred members as EDPs are not considered to be pension benefits. This section therefore applies to these members.

Calculation of the Cash Equivalent Transfer Value

For deferred members entitled to deferred benefits from SPA, the transfer value should be calculated in accordance with the standard procedures for calculating CETVs.

For reference, the tables in the Consolidated Factors Workbook used for calculating CETVs are:

Table 202 - for deferred benefits payable from age 65
Table 203 - for deferred benefits payable from age 66
Table 204 - for deferred benefits payable from age 67
Table 205 - for deferred benefits payable from age 68

The cash equivalent for either an active not entitled to immediate benefits or a deferred member should be calculated as follows:

CE = (MP x F_p) + (SUR x F_sur) - (PRE GMP + 0.15* x POST GMP) x F_gmp

Where:

MP = member's deferred pension (including Added Pension)

SUR = pension payable on the death of the member to their spouse or partner

PRE GMP = annual GMP accrued before 6/4/1988, including revaluation

POST GMP = annual GMP accrued after 6/4/1988, including revaluation

F_p = factor for member's pension - Table 202, 203, 204 or 205

F_sur = factor for survivor's pension - Table 202, 203, 204 or 205

F_gmp = factor for GMP saving - Table 202, 203, 204 or 205 (factor should be selected taking into account the date at which the member reaches State Pension Age - see the section entitled Adjustments for Guaranteed Minimum Pension)

*For a female under age 60 with a deferred pension payable from age 65, replace 0.15 with 3.5. For a female over age 60 with a deferred pension payable from age 65, use the GMP factors in table 202C.

For calculations being completed after a pension sharing order has been made, the appropriate factors should be taken from the tables in force at the valuation day using the SPA as given by stated Government policy as at the valuation day. For other cases, the tables in force and applicable SPA should be taken as at the calculation date. In all circumstances, the factors should be selected by reference to the member's age as at the calculation date.

Members with an existing pension debit

The transfer value should be calculated in two stages. Firstly the transfer value should be calculated ignoring the pension debit. Secondly, the value of the pension debit should be calculated as the transfer value of a deferred pension of the same amount as the debit. The CETV is the gross transfer value less the value of the pension debit.

This section sets out the method for calculating the pension credit payable to the ex-spouse following the issue of a pension sharing order by the Court.

All references to ex-spouse in this document can also be interpreted as an ex-civil partner or another ex-partner that is eligible for a pension on the member's death.

The factors needed to calculate the pension credit are provided in the Consolidated Factor Workbook.

Table 307 sets out the factors needed to calculate the pension credit for the ex-spouse assuming that it will be paid when the ex-spouse reaches SPA 65 or immediately if the ex-spouse is already at SPA 65 or over.

Table 308 sets out the factors needed to calculate the pension credit for the ex-spouse assuming that it will be paid when the ex-spouse reaches SPA 66 or immediately if the ex-spouse is already at SPA 66 or over.

Table 309 sets out the factors needed to calculate the pension credit for the ex-spouse assuming that it will be paid when the ex-spouse reaches SPA 67 or immediately if the ex-spouse is already at SPA 67 or over.

Table 310 sets out the factors needed to calculate the pension credit for the ex-spouse assuming that it will be paid when the ex-spouse reaches SPA 68 or immediately if the ex-spouse is already at SPA 68 or over.

The calculation factors should be based on the age of the ex-spouse at the calculation date, the form of the pension share benefits awarded and the SPA of the ex-spouse as given by stated Government policy at the valuation day. The age and SPA of the member should not be used. The factors should be taken from the tables in force at the valuation day with reference to the age of the ex-spouse as at calculation date and SPA as at valuation date.

The pension credit is calculated using the following formula:

Pension credit = ESCE / F_p

Where:

ESCE* = the ex-spouse cash equivalent - see the section entitled Calculation of the value of the shareable rights

F_p = factor for ex-spouse pension - Table 307 for SPA 65, Table 308 for SPA 66, Table 309 for SPA 67, Table 310 for SPA 68

* For divorces under Scottish Law, use MA as specified in the section entitled Calculation of the value of the shareable rights

Pension credit benefits

The pension credit benefits will be paid when the ex-spouse reaches SPA, or immediately if the ex-spouse is already beyond SPA. However, the pension credit member will have the option of claiming the pension credit benefits on reaching at least age 55. If the pension credit comes into payment earlier than assumed at the time of the pension sharing order, the credits should be adjusted. The pension credits will be adjusted for early payment using factors in Table 311. For further details see the section entitled Adjusting the pension credit for early/late payment.

The ex-spouse's pension credit will be subject to pension increases under the provisions of the Pensions (Increase) Acts.

Unless the relevant pension debit member has exercised their commutation option before the effective date of the pension sharing order, then the ex-spouse will have the option of commuting the pension credit to a tax-free lump sum at a rate of 12:1 subject to HMRC limits.

This section sets out the method and instructions for calculating the pension debit to be applied to the member's benefits following the issue of a pension sharing order by the Court:

Where the member is a pensioner, the debit will apply to the member's own pension with immediate effect and also to the pension payable to a future surviving spouse, civil partner or other qualifying partner on the member's death.
Where the member is a deferred pensioner, the debit will apply to the member's pension at the point when the pension becomes payable. The debit will also apply to the pension payable to a future surviving spouse, civil partner or other qualifying partner on the member's death.
Where the member is an active member and is not entitled to receive benefits immediately on leaving service, the debit will be calculated assuming retirement at the member's SPA as given by stated Government policy as at the valuation day. Where the member is entitled to receive benefits immediately on leaving service, the debit will be calculated assuming retirement at the effective date of the pension sharing order. If the member retires at a different age, the debit will be adjusted. The debit will also apply to the pension payable to a future surviving spouse, civil partner or other qualifying partner on the member's death.

Pension debit for current pensioner

The pension sharing order will specify the percentage of the member's benefits that the ex-spouse or ex-civil partner will be entitled to, for divorces in England & Wales. For Scottish divorces the value of the cash equivalent to be shared will be specified, and the proportion will be calculated as described in the section entitled Calculation of the value of the shareable rights.

The debit applying to the member's pension will be:

MEMDEB = MP x Appropriate percentage %

Where:

MP = member's pension (including any Added Pension)

The debit applying to any future surviving spouse, civil partner or other qualifying partner's pension will be:

SURDEB = SUR x Appropriate percentage %

Where:

SUR = pension payable on the death of the member to their spouse

MP and SUR amounts should be the same as used to recalculate the cash equivalent of the member's benefits in the section entitled Calculation of the value of the shareable rights.

Pension debit for a deferred pensioner

The principle is the same as for the pensioner, except that the debit will not start to be deducted until the member's benefits come into payment.

The debit should be expressed as a debit to the member's benefits at exit:

MEMDEB = Member's pension at exit x Appropriate percentage %

SURDEB = Survivor's pension at exit x Appropriate percentage %

At retirement, both the benefit and the debit should be revalued from the date of exit to the date of retirement, and the revalued debit should be subtracted from the revalued benefit.

If the member's deferred pension comes into payment earlier than assumed at the time of the pension sharing order, whether on voluntary early retirement or on grounds of ill health, the debit applied should be adjusted.

This is because the debit will be applied over a longer period than assumed in the original debit calculation. The pension debit will be:

Member's pension debit = MEMDEB x PI x ( MEMERF at actual pension age / MEMERF at member's SPA)

Survivor's pension debit = SURDEB x PI

Where:

MEMDEB = pension debit to the member's pension at exit

SURDEB = pension debit to the spouse's pension on the member's death after exit

PI = the pension increase factor between exit and retirement

MEMERF = early retirement factor - Table 311 (Normal Health) or 312 (Ill Health)

Pension debit for an active member

The principle is that the debit acts like a negative deferred pension. The debit should be expressed as a debit to the member's benefits, as used to recalculate the cash equivalent of the member's benefits:

MEMDEB = Member's pension used in cash equivalent calculation x Appropriate percentage %

SURDEB = Survivor's pension used in cash equivalent calculation x Appropriate percentage %

When the member retires, the total pension is initially calculated ignoring the pension debit. The pension is then reduced to allow for the pension debit. The debit should be revalued from the time of the divorce up to the date of retirement.

The pension debit applied to the member's pension is increased if the benefits are put into payment after the member's SPA age at the time the pension debit comes into payment (this may differ from the SPA assumed at the time of the implementation of the pension sharing order), irrespective of whether or not the retirement is on grounds of ill-health. This is because the debit will be applied over a shorter period than was assumed in calculating the original amount of the debit, and so a higher amount should be deducted.

The pension debit will be:

Member's pension debit = MEMDEB x PI x (MEMERF at actual pension age / MEMERF at member's SPA)

Survivor's pension debit = SURDEB x PI

Where:

MEMDEB = pension debit at divorce

SURDEB = pension debit at divorce on the spouse's pension on the member's death

PI = the pension increase uprating factor between divorce and the date of retirement

MEMERF = early retirement factor - Table 311 or 312

The formulae above should also be used where the active member is at least age 60. However, as the member is entitled to receive benefits immediately, the debit is also assumed to commence immediately. The assumed pension age for the debit in these cases is therefore the member's age in years and months at the calculation date. The formulae make an adjustment to the debits if the member retires at a later date. This adjustment does not apply to the debit applied to the spouse's pension.

The member's SPA for the purpose of the calculations above should be the SPA at the time the pension debit comes into payment. This may differ from the SPA assumed at the time of the pension sharing order.

Pension debits - future spouses

The benefits payable to a new spouse, new civil partner or other partner who is eligible to a pension on the member's death should be reduced by the survivor's pension debit, revalued using the pension increase uprating factors. No spouse or civil partner's benefits will be payable to the person who was party to the divorce resulting in the pension sharing order (except in the unlikely situation that the member remarried or entered into a new civil partnership with his or her ex-spouse or ex-civil partner).

No adjustment is made to the debit applied to the spouse, civil partner or other qualifying partner's pension if the member retires earlier or later than assumed when calculating the pension debit.

Pension debits - other benefits

No debit will be applied to a child's pension.

No debit will be made to the lump sum death benefits payable to serving personnel who were active members at the date of their death.

Pension debits - commutation

For members who have not started receiving their pension when they become subject to a pension debit, upon their pension subsequently coming into payment they will be able to commute the leftover pension (i.e. the pension left once the debit has been applied) at a rate of 12:1 and subject to HMRC limits.