A late payment supplement (LPS) is awarded as an increase to the benefits of deferred members of the nuvos scheme who retire after their NPA. LPS will be awarded in cases where members leave service on or after NPA and then delay claiming a pension until after NPA. The process for calculating the LPS is slightly different depending on whether the member left service before or after NPA, as described below.
The LPS is awarded as a one-off increase on the date of the member's retirement. This differs from age additions, which are awarded each year that the member remains in active service after NPA.
The LPS is determined by applying the appropriate LPS factors to each description of pension at the point of retirement, where the pension includes any inflation increases awarded between the date that the member left service and the date at which they retire.
The relevant factor tables are:
- table P1LPSNUV1 - to be used where the LPS applies to the member's pension and the contingent partner's pension. For example:
- earned pension
- Non-Club transferred pension
- Contributed (all beneficiaries) pension
- table P1LPSNUV2 - to be used where the LPS applies only to the member's pension e.g. contributed (self only) pension.
The formulae below outline the two-stage process for calculating the LPS.
Stage 1 - Calculate the LPS percentage
LPSNPA percentage = [(Factor at late retirement age) / (Factor at NPA*)] - 1
Where:
Factors are taken from the appropriate table, as explained above. Late retirement age and NPA should be ages in complete years and months, with part months ignored.
*where the member leaves active service after NPA, the factor at leaving age should be used instead of the factor at NPA.
Stage 2 - Calculate the LPS using the LPS percentages calculated in Stage 1
LPSNPA = (LPSNPA percentage) x (Pension at retirement which was payable from NPA)
Total LPS = LPSNPA
Where:
Pension at retirement is before the commutation option is exercised and includes any inflation increases awarded between the member leaving service and the date of retirement.
Where the member leaves active service after NPA the pension at retirement should additionally include any age addition awarded in respect of the member's post-NPA active service.
The following points should be noted:
- The LPS should be added before the commutation option is exercised.
- Where the LPS is calculated using table P1LPSNUV1, the contingent partner's pension should also receive a LPS increase. Where the LPS is calculated using table P1LPSNUV2, the contingent partner's pension should not receive a LPS increase.
Our understanding is that Pension Credit pensions should not receive any increase on late retirement.
On late retirement, pension debits must be increased to reflect that the debit will be in effect for a shorter period than expected.
If the debit occurred before the member's NPA, then it should be treated as a (negative) earned pension (i.e. payable from NPA) for the purposes of determining the LPS increase which should be applied to the debit. The debit at retirement should be calculated in accordance with the formulae above.
Pension debits apply to the contingent partner's pension, as well as the member's pension. The LPS applied to the pension debit should also be applied to the contingent partner's pension.
If the debit occurred after NPA, then the case should be referred to GAD to advise on the appropriate increase to apply to the debit.
This guidance does not cover the adjustments to apply to scheme pays debits on early or late retirement. Please refer to the separate guidance on scheme pays debits.
LPSs for added pension will be calculated differently depending on whether the added pension is contributed 'all beneficiaries' or contributed 'self only'.
LPSs for added pension (all beneficiaries) are calculated using table P1LPSNUV1 in the same way as for earned pension (i.e. assuming the added pension is payable from the member's NPA). The contingent partner's pension will also be increased by 37.5% of the LPS applied to the member's pension.
LPSs for contributed pension (self only) are calculated using table P1LPSNUV2. It should be assumed that the contributed (self only) pension is payable from the member's NPA. There is no contingent partner's pension attached to contributed (self only) pension.
