Members who wish to take their scheme benefits before their normal pension age (NPA) or, if applicable, their effective pension age (EPA) may be entitled to actuarially reduced benefits on early retirement. NPA in the alpha scheme is defined as a member's state pension age, or 65, if that is higher. For the purpose of this guidance, state pension age is as defined in legislation on the calculation date.
The factor tables required for ARBO calculations are provided for the range of pension ages which apply to members who join the alpha scheme at inception.
The factors should be selected according to the member's age (in years and complete months) and pension age. If a member has a non-integer pension age then more than one factor is required and these factors are interpolated to obtain the actual factor to use.
To calculate the ARBO cost for a member retiring early from the alpha scheme, the following formula should be used:
ARBO = P x FxP
Where:
P is the member's unreduced pension at the relevant date (including added and transfer in pension)
Fxp is the relevant factor for a member aged x (in years and complete months), taken from Tables P2ARBO65, P2ARBO66, P2ARBO67or P2ARBO68 depending on the member's pension age p (NPA or EPA, as appropriate).
Where a member wishes to buy out the actuarial reduction on a pension with several different pension ages (e.g. because some of the pension has an EPA while the rest is payable from NPA), the calculation should be done separately for the member's pension attributable to each pension age and then the answers should be added together to give the total ARBO cost.
The ARBO cost should be calculated before the member commutes pension for lump sum and before offsetting any divorce or scheme pays debits.
