The formula for calculating the additional benefit (transferred pension) to be awarded in respect of a transfer value received by the scheme from a pension scheme that is a non-Club transfer is set out below.
Transferred pension awarded in respect of a transfer value is payable on the same terms as pension accrued as a member of the scheme, from the member's normal pension age (NPA) and includes attaching benefits such as 37.5% partner's pension. NPA is defined as a member's state pension age (or 65, if that is higher) in the alpha section. We have assumed that any transferred in pension is not affected by the purchase of an Effective Pension Age (EPA) option and the transferred in pension retains the original NPA.
The factors should be selected according to the member's age last birthday, sex, NPA and for the revaluation factor the number of 1 Aprils falling between the calculation date and NPA. If a member has a non-integer NPA then more than one factor is required and these factors are interpolated to obtain the actual factor to use. The following interpolation formula applies for a member with a non-integer NPA of y years and m months:
F(y,m) = F(y) + [(m/12) x (F(y+1) - F(y))]
Where:
F(y) is the factor for the member based on an NPA of y years
F(y+1) is the factor for the member based on an NPA of (y+1) years
We have simplified the presentation of the interpolation formula compared to what may have been used in historic examples, but the effect of the formula is the same as the old formulation i.e. it gives the same answer, so there is no need to update administration systems.
To calculate the amount of transferred pension, the amount of the transfer payment is required.
If a member wishes to transfer in with a non-Club transfer payment, the transferred pension to be awarded to the member should be calculated as:
Transferred Pension = CETV / [(FxP + FxS) x FyReval]
Where:
CETV is the member's incoming transfer value
FxP is the relevant member's pension factor for a member aged x, taken from Tables P2TVIN65 to P2TVIN68 as relevant for the member's NPA (Tables 0-214 to 0-217 in the consolidated factors workbook)
FxS is the relevant partner's pension factor for a member aged x, taken from Tables P2TVIN65 to P2TVIN68 as relevant for the member's NPA (Tables 0-214 to 0-217 in the consolidated factors workbook)
FyReval is the relevant revaluation factor for a member with y number of 1 Aprils between the calculation date and NPA, taken from Table REVAL (Table 0-001 in the consolidated factors workbook)
After calculating the amount of transferred pension that the transfer payment is sufficient to purchase, the result should be tested as set out in the Regulations to ensure that it does not exceed the maximum amount permitted.
